Abstract: The risk of implicit debt lies in the“implicitness”, which is the result of the local governments' use of hidden financial decentralization to expand the debt. The implicitness of the implicit financial decentralization is reflected outside of the unified and standardized financial system arranged by the central government; a series of non-standard implicit financial system arrangements among local governments for the independent delineation and distribution of the allocation and the control rights of financial resources are important ways to promote the irrational expansion of local debts. With the help of local financial institutions, financing platforms, the PPP projects, shadow banking, state-owned enterprises and other controllable platforms, local governments conduct debt financing via urban construction investment debts, purchasing services by governments, financial leasing and other non-standard financing ways, thus debts are formed that is related to the local governments, which is the result of each interest subject gaining economic interests wantonly under the imbalanced incentive and constraint mechanism. Therefore, in order to prevent the irrational expansion of local debts, it is necessary not only to do a good job in the fiscal and political incentives of local governments, but also to straighten out the financial relationship between the central and local governments. And financial supervision should be carried out well, so as to promote the transformation from implicit financial decentralization to marketized financial centralization.

Key words: local debts, implicit debt risks, implicit financial decentralization, local financial institutions, financing platform