Local Government Debt Management Solutions

Two rounds of leveraging-up have led to a high debt ratio in the Chinese economy,triggered liquidity mismatch and increased systemic financial risks.The key causes of local government liabilities are soft budget constraints and non-market-based factor allocation.Currently,the risks of local government liabilities are generally controllable.This paper concludes that the long-term solution to managing local government liabilities is to enhance budget constraint and institutional assurance and proposes countermeasures in the reform of urban construction investment and financing mechanisms.