A Study On The Early Warning Mechanism Of Local Government Debt Risk In China

Our government has implemented a proactive fiscal policy since the2008economic crisis, a series of economic stimulus plans have curbed the economic downturn effectively as well. At the same time, the status of the financial power center upwards and work power center downwards which brought by the tax reform make the local government financial cannot support the huge spending pressures, it leads to debt management has become the dominant norm. So far, our local government debt risk problem which includes the scale of China’s local government debt surged and has been accumulated for a long time gradually came out has become an important factor in the process of China’s steady economic growth. Therefore, it has become a major challenge for the local finance to monitor the risk exposures which brought by local government debt effectively, assess the risk profile of local government debt accurately, issue warning signals of local government debt risk timely and prevent and defuse local government debt risk as early as possible has become a major challenge for local governments.This paper starts at the theoretical basis of local government debt risk, firstly defines the meaning of local government debt and its risks, and analyzes the status of massive local government debt, the big repay overdue risk and management deficiencies. It systematically studies the formation mechanism and conduction passed way of local government debt risk from the financial system, economic factors and local government behaviors. To lay a solid theoretical foundation for the study of local government debt risk warning, it describes the current situation and the imperfect reasons of local government debt risk pre-warning. In addition, based on introducing the basic objectives, principles and design structure of local government debt risk pre-warning system, this paper establishes the pre-warning indicators system which can scientifically and accurately reflect the status of the debt risk. And use the fuzzy comprehensive evaluation method and sustainable dynamic model to establish the local government debt risk pre-warning system, in order to judge the local government debt risk grade and the sustainability of the debt. What’more, this paper through the local government debt risk pre-warning model to analyze the debt risk of Shaanxi province from2007to2013, it is concluded that the Shaanxi province government debt is currently at moderate risk area and do not have the characteristic of sustainability. At last, for many problems currently exist in local government debt pre-warning, in order to maximize the effectiveness of local government debt risk pre-warning system and timely prevent and resolve local government debt risk, This paper presents some countermeasures to improve the local government debt risk warning mechanism:At first, improve the disclosure regime about local government debt risk information. Secondly, establish a cross-type organization of local government debt risk pre-warning system. Third, establish debt service reserve system. At last, improve the processing mechanism based on the different local government debt risk warning results. If the local government debt is a safe area, the local government needs to take regular monitoring. If the local government debt is in light districts, the local government need take some pretention measures. If the local government debt is heavy police district, the local governments need to make the greatest effort to control the further expansion of debt risk and gradually resolve the debt risk..