Research On Risk Assessment And Prevention Of Local Government Debt Under The Supply Side Reform

Recently,the issue of local government debt has been one of the major problems that hinder China’s economic stability and sustainable development.Supply Side Reform as the main reform policy in our country,the local government fiscal and debts are closely related to Supply Side Reform undoubtedly.In order to evaluate and prevent the current local debt risks more accurately,it is necessary to analyze the local government debt risk combining with Supply Side Reform.Based on the research of scholars at home and abroad,against the background of China’s Supply Side Reform,and for the local government debt risk assessment and prevention problems,this paper begins with the following plan: First of all,starting from analyzing relevant historical data,through analyzing the principle of interaction about supply side reform and government debt,and the current situation of local government debt.And then discussing the possible debt risks,and adding the impact factor of reform on risk into KMV model,therefore,a modified KMV risk assessment model based on supply-side reform is constructed,and analysis and evaluate local debt risk in the future three years.Finally,combining with the results of above,put forward some local government debt risk prevention suggestions under the background of supply side reform.Study finds that supply side reform has a negative impact on local government debt risk in the short term.This requires higher levels of local finance.Affected by supply side reform and huge historical debt accumulation,the short-term risk of local government debt is expected to increase,and long-term risks are difficult to be determined due to the effect of supply side reform.So local governments must implement corresponding measures to deal with the impact of supply side reform on local government debt risk actively.By modified KMV model assessment and stress testing,Local government in China from 2018 to 2020 have a certain risk of default,exceeding the standard default probability set by the Moody’s.And then we calculate the critical scale of the local government debt in this three years.Affected by supply side reform,if the uncertainty factor parameters of local fiscal parameter is less than 0.2,it will the default probability is very small,and local government debt is within safe limits,if it belongs to(0.2,0.25),local government will be likely to default,if it is 0.25 or above,the local government default risk will be greatly increased.