The Local Government Debt Risk Assessment Of Liaoning Province Based On Modified KMV Model

According to western economic thinking,local government debt is closely related to economic development.Moderate local debt scale can promote regional economy.However,there is a threshold effect between local government debt and economic growth.Once local governments neglect their own financial capacity and excessive debt financing,they will further trigger local debt risks and become a stumbling block to the economic development.Since the reform of the tax sharing system in 1994,local governments in our country have faced an imbalance in the power of financial power.Coupled with the influence of factors such as the proactive fiscal policy in 2008 and unscientific officials' performance evaluation mechanism,the total amount of local government debt has soared.Debt pressures have continued to increase,and debt risks have continued to accumulate.In 2017,China's local government debt risk is overall controllable,and the risk of debt in some areas has increased.Liaoning Province is under the influence of economic restructuring,and economic development is falling into the cycle of “debt risk rising-new capital contraction-infrastructure investment decline-economic growth slowdown-debt risk rising” in the cycle of local government debt risk Especially prominent.At this stage,the Central Economic Work Conference has included the prevention and control of local government debt risk as one of the key tasks.Scientifically and accurately assessing local government debt risk is the basis for effectively preventing and resolving risks.This article takes Liaoning Province as the research object,combines relevant debt theory and government debt audit report,analyzes the overall status of local government debt in Liaoning Province from two aspects of total debt volume and structure;and then starts from the perspective of risk characteristics and causes,Analyzed the situation of local government debt risk in Liaoning Province.Then,based on the revised KMV model of adding the central government's transfer factor to local debt,the paper analyzes the debt risk of local government in Liaoning province.The conclusions of the study show that under the circumstances that the central government has completely transferred and assumed the debt of local governments,the default risk of Liaoning Province in 2017 is extremely low.However,the debt risk in 2018 and 2019 is on an upward trend and needs strict prevention and control.According to the conclusions of this study,we believe that we should improve the debt management law,strengthen the local government's credit rating system,improve the debt risk early warning mechanism,establish a debt repayment reserve system,standardize the financing behavior of local government officials,and standardize the local government debt financing mechanism.Initiate prevention of local government debt risk in Liaoning Province.