Chinese Local Government Debt Risk Assessment

Since the outbreak of the financial crisis, the European debt crisis has attracted worldwide attention. Chinese local government debt’s problem also increasingly comes out now, and the scale of Chinese local government debts becomes the focus of discussion from all walks of life. Chinese local government debts has many characteristics, such as, local government set up platforms to find debt indirectly, debt financing is mainly used for infrastructure construction, lots of the funds rely on banks, debt repayment depends on the local fiscal revenue, debt scale, rapid growth and so on. The scale of local government debts affects the risk of local financial and the financial security of China directly. It is an important and urgent task for us to find ways to find its safe scale.On the basis of many researches at home and abroad, the author analyzes the problem of Chinese local government debts security scale deeply making use of theoretical analysis and practice at the same time. This paper researches the related theory knowledge of local government debts and the practice of other countries at home and abroad systematically at first,then by introducing the pressure test, suitable for the establishment of Chinese local government debt risk evaluation model, and takes Beijing city as a case study. Finally, to control the local government debt scale in China put forward relevant ideas and suggestions, put forward our country should establish and improve the mechanism of control and resolve the debt, debt risk early warning mechanism and a system of laws and regulations, but also should improve budget management and budget accounting system etc.The main innovation of this paper lies in that, through the ability of local government investment and the difference between the investment demand of new debt, and on the basis of the stock of debt debt scale is determined, and then by using stress testing, using,the scenario analysis method to conduct the risk assessment of local government debt scale.