In 1994，because of the insufficient ability on managing state financial revenue，our country carried on the epoch-making tax distribution system reform. However，the reform is not yet complete，which led to the mismatch of financial power and administrative authority between the central and local governments. Local governments have accumulated massive debt during this process. Moreover，along with the progress of industrialization and urbanization，the People’s Livelihood Project progresses by leaps and bounds. Especially since 2008，the large-scale public investment plan which aims to deal with the international financial crisis has further intensified the debt risk of the local governments. The rapid expansion of the local debt scale has already threatened social stability and economic development. If the local debt risk cannot be controlled promptly，it will pass the burden to the central government，and then compromise social stability and sustainable development.