Abstract
This paper, the formation, scale and constitution of China's local government debt are discussed. The status of various assets available for repayment is thoroughly analysed, including fiscal revenue, government fund revenue, state-owned enterprise profit, state-owned enterprise net assets, state-owned non-operating assets and resource assets. The conclusion is that local governments have a low risk of insolvency; however, due to the mismatching of assets and liabilities, which comes from the low efficiency of investing, there is a certain risk concerning liquidity and payment indeed. The root cause as well as solutions and management of local government debt are also studied, such as, improving the transparency of local debt, implementing of quantitative debt indicators, and establishing the relevant laws to control debt quota. Local government debt risk can be countered by assets securitization, sell and rent, public-private partnerships (PPP), etc.
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