The Formation Mechanism and Resolution Path of Local Government Debt Risks from the Perspective of Fiscal Decentralization

Abstract

Against the backdrop of fiscal decentralization, the risk of local government debt has been continuously escalating. The rapid expansion of debt scale poses a significant threat to regional economic development and fiscal stability. This paper analyzes the profound impact of the fiscal decentralization system on the formation of local government debt risks, and dissects the role of key factors such as the mismatch between administrative responsibilities and financial powers, the abnormal fiscal incentive mechanism, and the flawed local debt management system in driving debt expansion. Based on constructing an effective debt risk prevention and control mechanism, this paper proposes diversified measures, including optimizing fiscal decentralization arrangements, improving local debt management mechanisms, strengthening financial resource guarantees, and enhancing risk early-warning mechanisms, to effectively enhance the local government's debt management capabilities and risk prevention skills, and promote sustainable fiscal development.