Study On Local Government Debt Risk And Early Warning At The Present Stage

In recent years, especially after financial crisis in 2008, the scale of local government debt rises acceleratly, the issue of local government debt risk becomes the tracking focus of many scholars and experts at the present stage. According to the latest official statistics, until 2013 June, the overage of China’s local government debt has reached 17.89 trillion. In fact, before financial crisis, the total amount of local debt is not so much, that is to say, debt growth is mainly concentrated after the stage of China has put 4,0000 million economic stimulus measures into practise in 2009. Experts say that local government debt risk will be the first "gray swans" of 3D(Deflation, Devaluation, Default) dilemma which China will be confronted in 2015. The No. 43 document which is newly published in October 2014 pointed out that central government draw clear boundaries with local government for the problem, implement the principle of no aid, and no longer endorse for local debt, which will undoubtedly increase the pressure on local governments. Therefore, in order to prevent the possible changes of debt crisis, scientific warning and resolving local debt risk is one major issue that we need to study at the present stage.This paper begins with how to delimit local government level of local government debt and the statutory meaning of debt, then redefine the connotation of the overall debt of the local government; at the same time, introduce the local government debt classification by Hana which is more international recognized, that is conbined matrix consisted four category debt with direct debt and contingent debt, explicit debt and implicit debt. And the category of government debt by previous recognized authority institution; then combine the financial risk, define the risk of local government debt, clarify their identity and its transfer method. Next, from the aspect of overall scale, hierarchical distribution, regional distribution, debt principal part, the sources and uses of capaital of our country’s local government debt, using the latest data analysis comprehensively, and understand the specific situation of our country at the present stage, and find local government debt exist revenue and expenditure risk, scale risk, structural risk, management risk and liquidity risk, as well as uncontrollable external environmental risk, and made clear that the reasons of the formation of risk, such as the uncertainty of the debt itself, our tax system deficiencies, urbanization accelerate causing increased demand of fund, short-term government action and the blind confidence of local government.Then based on the explanation of building local government debt risk early warning system necessarily and possibly, design warning process on the whole and pointed that early warning method and index system is the core of measurement and evaluation of risk, which index set established from internal risk, relative risk and external risk; for early warning method, this paper first describes current main methods commonly used in the field, and then describes basic principles of local government early warning system model established on factor analysis which we choose to use this article.With S province as the research object, reduce 108 data which reflect S provincial local government debt risk indicators from 2007 to 2012 through cluster analysis of multivariate statistical, re-use factor analysis to reduce the dimensionality, extracted out the three main factors with SPSS 18.0, derived factor composite score value,The conclusion is S province debt risk situates in moderate risk rangeat this stage, and by the explaination of one of the main factors,we can see that fundamental starting point and foothold point to control S province debt risk is to reduce the total amount of debt and contingent liabilities proportion so as to reduce the structural risk and overall risk. At the end of the article chapter, the author gives countermeasures and suggestions to prevent local government debt risk early warning from three angles which included improving the financial system, the establishment of regulatory mechanism and the introduction of new government performance appraisal mechanism.