Abstract: At present, the debt scale of China’s local governments is tremendous, which is inconsistent with the rule of China’s annual budget balancing mechanism. To carry out the reform of the inter-temporal budget balancing mechanisms with the four key components of medium-term expenditure frameworks, fiscal policy report, budget stabilization fund and debt sustainability analysis is helpful to cure the “alcoholic’s behavior” of the local governments, governing the local debt risks from the source. In order to take the advantage of the inter-temporal budget balancing mechanisms to prevent the debt risks of the local governments, we should revise and perfect the budget law, strengthen the budget constraint on the behavior of local governments, establish a medium-term expenditure framework for the time span of 5-year term of office for China’s local Party and government leaders, achieve reasonable positioning of the autonomy in decision-making of local budget, and effectively improve the technology for fiscal revenue forecasts and expenditure estimates.

Key words: debt risks of local governments; public budget; annually balanced budget; intertemporal budget balance