Abstract: Under the background of regulating local government debt-raising behavior and preventing financial risks, the debt problem of local government financing platforms has become the focus of attention. This paper analyzes the evolution and current situation of the debt of local government financing platform and concludes that the local government financing platform has become an important tool for the government to adjust the macro economy counter-cyclically to some extent. The local government financing platform has experienced the initial stage, explosive growth, clean-up, implicit debt expansion, exit and transformed development stages. Currently, through the provincial government financing platforms have higher leverage, the level of repayment guarantee is higher. Bank funds are the main source of debt for local government financing platforms, but their channels continue to tighten. Different levels of local government financing platforms face different levels of financing difficulty. The failure of the incentive and restraint mechanism under the principal-agent relationship is the root cause of the debt problem of the financing platform. The quasi-sovereignty or sovereign debt nature of the financing platform determines the low substantial probability of default, although debt risk is controllable overall, the phased liquidity risk is worth attention. In the future, further improving the incentive and restraint mechanism in the central-local government's principal-agent chain, promoting the withdrawal and transformation of platform companies, and transforming government functions and economic growth methods are the key to resolving implicit debts.
Keywords: Local Government Financing Platform；Local Government Debt；Implicit Debt；Quasi-municipal Bond；Debt Risk；Fiscal and Financial Risk；Debt Crisis；Counter-cyclical；Principal-agent；Economic Transition
The Chinese version appeared in Southwest Finance, 2019(01).