Abstract: The assets and their benefits controlled by local governments that can be used to defray the debts are the guarantees for ensuring the repayment of local government debts. The local government debt risks emerge as the possibility of debt defaults due to insolvency. The results of the calculation of China′s local government debt risk in 2010-2017 show that the local government′s asset-liability leverage ratio is rising, and the return on repayable assets is declining;when the pension gap is taken into account, the change of financial structure of the local governments has a significant impact on the debt risk. Therefore, only if the present value of the pension gap is no more than 24 trillion RMB which the local governments actually undertaken, the local government debt risks can be safe and controllable.

Key words: local government debt risk, repayable assets, Sharpe Ratio;loan financing structure , contingent liabilities