Research on the Application of PPP in Preventing and Resolving Local Debt Risk in China

Abstract

By the end of 2018, China's local government debt balance was 1.83862 trillion Yuan, and the local government debt ratio was 76.6%. If the hidden local debts is taken into account, the debt ratio of local governments in China will be higher, which may approach or reach the internationally accepted warning standard. The increase of local debt will lead to increase the risk of local financial, economic, credit, social and politics. Therefore, it is necessary to focus on the prevention of local debt risk. PPP mode itself will generate local debts, but PPP mode is one of the effective ways to prevent and dissolve local debts. It can prevent and defuse local debts by absorbing social capital to invest, invigorating existing infrastructure assets with PPP mode, transforming local financing platform with PPP mode and securitization of PPP project assets. However, there are still some problems in the application of PPP model in preventing and resolving local debts in China. It is necessary to reasonably design the risk sharing and prevention and control mechanism of PPP, further standardize the operation and management of PPP, promote the transformation of local financing platform companies with PPP model as far as possible, and actively promote the asset securitization of conditional PPP projects