Abstract: Faced with the rising of local finance in China, the local governments have incorporated their self-interest demands for financing regional economic development while complying with the market-oriented development. The central monopoly of financial supervision power makes the local and central governments continue to play games in the supervision and development of local finance. While the games between the two sides continue to promote the development of local finance, they have also brought an endless stream of chaos. The main cause of the chaos is that the central and local governments have insufficient objective ability and subjective willingness to supervise local finance. On the basis of sorting out the multiple forms of local finance and clarifying the nature of local finance, the necessary measures to effectively govern local financial chaos would be re-dividing the financial supervision powers between the central and local governments and completing the vertical division and the vertical construction, as well as the horizontal concentration and planarization construction of local financial supervision powers.

Key words: local finance, financial chaos, regulatory structure, division of authority