Research on the Risk of Local Government Debt in China and the Path of Prevention and Control

Abstract

Over the past several years, the scale of local government debt in our country has rapidly expanded, sparking widespread societal concern over the escalating debt risks. As a critical component of fiscal expenditure, local government debt exerts a dual effect on economic development; it can stimulate local economic growth through investment but also pose a potential fiscal risk due to excessive borrowing. The accumulation of local government debt is attributable to deficiencies in the fiscal system and governance mechanisms, as well as the impact of changing external economic conditions. By analyzing the current state and causes of local government debt, clarifying the manifestations of risk, and drawing on international experiences, this paper proposes a series of preventive measures. This is not only crucial for safeguarding the fiscal health of local governments but also imperative for ensuring the long-term stable development of China's economy. Based on a review of the risks associated with local government debt, this article explores pathways for prevention and control, offering theoretical support and policy recommendations for optimizing local debt management in China.