The Local Government's Fiscal Risks and Their Solutions under Supply-Side Reform in China

The current five tasks of China's supply-side reform, which are de-capacity, de-stocking, de-leveraging, lower costs and offset weaknesses, will cause new fiscal risks to the local government. We use qualitative analysis to investigate the local government's fiscal risks under the supply-side reform. By analyzing the changes which influenced by the supply-side reform on the local government financial resources, we consider that the gap between local government's fiscal revenue and expenditure will widen. That will lead to three kinds of fiscal risks: local government debt risk, PPP project risk and local fiscal administrative risk. In order to solve these fiscal risks, we suggest the local governments need to improve the local government fiscal risk assessment system, speed up the establishment of local tax sources, reform the storage management mode of PPP project, and regulate the local government administrative departments.