The Study On The Credit Risk Management Of The National Debts In China.

Credit risk is a kind of important risk for the financial market and the economy in a country. The bond market has been developed for twenty-three years in China. The national debts market is the most important part of the bond market. The research on credit risk of bond market has not been paid more attention. Most of the research on national debts rests on qualitative analysis. It is a senseful study on the credit risk of the national debts. It will alert people to pay more attention to the potential national credit risk. With the basic theories of credit risk management in KMV Co.Ltd, we did the study on the basis of the relevant data of national debts from 1981 to 2002 in China. We draw the conclusion that the national debts as gold bonds have credit risk, which is closely related to the issuing scale of the national debts. When the fiscal revenue of the central government is fixed, the credit risk will sharply increase with the expanding of the national debts' issuing scale. And we find that the KMV model in which supposes the default risk is normal distributing underestimates the credit risk of the national debts. This kind of underestimation will affect the veracity of decision about the national debts' issuing scale. Finally we give some suggestion to manage the credit risk of the national debts for example controlling the national debts' issuing scale, adjusting the structure of the national debts, promoting the efficiency of the national debts fund, harmonizing the fiscal revenue and fiscal expenditure.