In this paper, we introduce China's risk management policies since 2015 when it started to issue local government bonds and investigate the accompanied risk factors. First, China had established the maximum limits of local governments’ debts but the way of calculating them is not still transparent. Second, the substitute bonds issuance which was implicitly done until 2019, was practically ceased in 2020. This might, however, block the disposal of the non-bond debts. Third, the maturity of bonds began to be systematically controlled. The maturity of the project bonds is not still flexible. To understand the realities of local governments’ debt management, we analyzed their fiscal data and bond issue records. We found that 99% of local governments’ debt became bonds which are supposed to be transparent, but forced transparency could lead to unexpected risks. The limits of debt are obeyed as a whole but seem to be adjusted when needed. The off-the-budget accounts of some local units was in deficit and their project bonds could be distressed. We also found that the short history of local bonds and the regulation on their maturity make the redemption distribution uneven. Accordingly, the period of 2019~2022 is most likely a golden age of local governments’ fiscal health. But the burden of redemptions varies in different provinces considering the present values of their debts. The risk factors so far examined could be classified into the institutional ones which can be eased by some complementary measures and the structural ones which are difficult to deal with due to the nature of the Chinese economy system.
