Research On Assessment And Management Of China’s Fiscal Risk

With the rapid growth of Chinese economy in recent years, the state revenue had a rapid increase simultaneously, the fiscal policy’s macroeconomic adjustment effects is growing, but due to lack of steady growth mechanism of the state revenue, the fiscal policy of expanding debt issuance to improve the situation of financial operation had made the government’s debt burden and fiscal spending pressure increasingly heavy. Run defect of the fiscal system and series of uncertainties after economic development came into the "new normal" phase expanded the financial risk further. Accumulating financial risk will lead to a financial crisis and even economic crisis, thus affecting sustained, healthy and stable development of the economic situation and the society as a whole. Thus it is necessary to establish an assessment and monitoring mechanism to avoid and prevent financial risks. Fiscal risk assessment is a pressing issue faced by various countries in the process of financial operation and management, research on financial risk assessment and prediction mechanism is in the ascendant currently. Assessment and monitoring of the fiscal policy’s operation and effectiveness enabled the government’s economic management department has an early detection and prevention of the financial risks they are facing.Based on the research of connotation and categories of China’s fiscal risk, this study combined normative and empirical analysis, delved into the connotation, characteristics and forms of the financial risk, analysed of the construction principles, functional structure and operational mode of the fiscal risk assessment system. With reference of the measurement research experience of international fiscal risk assessment, selected the assessment method that coordinated with China’s fiscal operating mode. Established a fiscal risk assessment index system including direct dominant risk, probable dominant risk, direct hidden risk and probable hidden risk based on scientific statistical principles. The research built a fiscal risk assessment system by using analytic hierarchy (AHP) of operations research and conducted empirical study with the sample data. Constructed a non-financial parameter model of fiscal risk assessment system that coordinated with China’s economic development model and fiscal operating characteristics by interval mapping and weight determination, then calculated risk index values and conducted empirical analysis and assessment for each subsystem and the overall system, and discussed its future development trends.The results showed that the overall China’s fiscal risk in 2002-2008 has been in a "light alarm" state, but rised rapidly and reached the "middle alarm" range from 2009 to 2014.This is because the first half of the Chinese economy since 2002 has maintained a long-term steady growth, sectoral structure and sub-structure of the fiscal revenue are normal and are quite robust, the growth rate of fiscal revenue was greater than that of expenditure and the fiscal deficit was within a reasonable range, so fiscal risk indicators are all in normal range. Then with the occurrence of the US subprime mortgage crisis and the European sovereign debt crisis in 2008, the overall development trend of China’s economy was severely affected and impacted. China’s government launched a stimulus plan to expand the budget deficit and investment spending, which made the fiscal risk a sharp rise.It can be observed by research on China’s fiscal risk that the overall comprehensive risk of China’s fiscal risk had a more significant upward trend in the future. The probable hidden risk is in "heavy alarm" range and played an important role in the overall financial risk. Fiscal risk can not be ignored due to the development of the world financial crisis and China’s fiscal policy restructuring, it is necessary to make full use of the fiscal risk assessment system and its predictive model to take relevant fiscal policy and risk prevention measures to monitor and defuse financial risks, especially control and manage the probable hidden risk to ensure the smooth operation of the overall fiscal policy and sustained, healthy and stable development of the macroeconomy. This study scientifically constructed a fiscal risk assessment system that coordinated with China’s fiscal operating characteristics, made predictions and prospects of China’s fiscal risks in the future based on empirical analysis, improved the practical effect of the model in the assessment process.The research is based on nonlinear assessment system of operations research, constructed fiscal risk assessment model using AHP as major method, broke the limitations of linear assessment mode and achieved more effective and accurate assessment results than single macroeconomic forecasting model. The research established fiscal risk assessment system and conducted quantitative description and real-time monitoring of various economic indicators that determine China’s fiscal risk operation, which has a very important practical significance to prevent financial risks effectively and maintain China’s sustainable fiscal operation. Meanwhile, the research proposed countermeasures on prevention and defuse of fiscal risks and prospects of the fiscal risk assessment system based on conclusions of China’s fiscal risk analysis, which provided theoretical support and policy basis to improve the effectiveness and security of the fiscal policy.