The Study On Financial Risk Early Warning And Control Of Local Financing Platforms

Since 2020,the central government has strengthened its supervision of the financing activities of local government financing platforms and introduced relevant policies to strictly control the operational risks that may arise due to financial risks.These control measures have effectively mitigated the negative impact of potential risks from local government debt and prevented systemic risks,thus ensuring the sustained and rapid development of the Chinese economy.In addition,these strict policies have also forced lagging platforms that only have financing functions to seek transformation to comply with the new regulatory requirements.Although various levels of government have strengthened their supervision of local government financing platforms,there are still some platforms with heavy debt burdens that have high financial risks.Therefore,this paper takes the local government financing platform of T Company in N city as an example to study its financial risk warning and control.First,a case analysis of T Company is conducted to introduce its basic situation and analyze the external factors that affect its financial risk control.Then,based on the Z-score model,the average of 21 financial indicators over the past 4 years of 58 local government financing platforms located in the same region or of similar size as T Company is selected to construct a financial risk warning model for T Company,which is used for empirical analysis.Through analysis,it is found that there are problems with the warning mechanism,debt size,work process,and communication barriers across departments in T Company’s financial risk warning and control work.Finally,based on the analyzed problems,targeted improvement suggestions and measures for T Company’s financial risk control work are proposed.This paper conducts a case study and empirical analysis on the selected case,and based on the inspection results,the following conclusions are drawn:First,T Company’s current financial risk warning mechanism is not yet sound,and an effective risk warning,monitoring,and disposal system should be established later.Secondly,T Company should reshape its existing financial organizational governance structure and solve the problems in risk control work.Thirdly,T Company’s debt burden is too huge,and its existing business is greatly affected by policy factors.It needs to strengthen risk prevention awareness,and try to improve its cash flow management capabilities,and avoid the risk of default on maturing debts.Fourthly,T Company should respond to the requirements of the 20th National Congress of the Communist Party of China,deepen its own market-oriented reforms,gradually divest itself of financing functions that local governments undertake,and return to the market attributes of an enterprise.