The Chinese Government Sovereign Debt Risk Management Study

From historical perspectives, government external loans play a critical role in our country's economic development and social progress. We have succeeded in utilizing government external loans to mitigate inadequate fund in the path of national economic construction; enlarge export momentum; expand the investment; promote local economy and accelerate the development of national economy. Meanwhile, raising debts has two sides, on one side, it might boosts economy growth and enhance economy prosperity while brings debt crisis and damage national economical security and social stability.As any earthquake, sovereign debt crisis occurs frequently. Currently, many developing countries, even some of the developed countries are facing the sovereign debt problem. It is apparently leading to debt crisis due to without an prudential management system and effectively keeping sovereign debt risks under control. There are direct or indirect relations between the sovereign debt management and the fiscal or monetary policies. Therefore, government external loans need to be accentuated on the risk management in the national economy. As this paper choose the subject of "On the risk Management of External Sovereign Debt in China", mainly focus on the external sovereign debt operation and the strengthening of risk management in China. Any external sovereign debt crisis could be avoided throuth prudential management with effective measures. As we know, the financial crisis leads to debt crisis, and debt crisis expands from the developing countries to the developed countries. For instance, the public debt of U.S.A breaks through 12 thousand billion dollars by Nov.2009 and the aggregated national debt of Japan exceeds to 882.9235thousand billion Yen, No. the frist debt country in OECD as 229% of Japanese, meanwhile, the financial deficit of U.K. climbs to 153 billion pound in 31 March 2010, recorded highest since the second world war. All above cases show the aggregation of globle soverign debt becoming a leading problem to us. This paper devotes to the scientific evaluation of Chinese government external soverign debt by systematically and comprensively research, and explores the reasonable explanations of some critical problems in this field, as well as proposes a series of practical policy suggestions to strengthening government external soverign debt risk management in China on the basis of summarizing the lessons and the experiences, including the comparative research with an international perspective, analyzing the risk types and pressure to Chinese government external sovereign debt, designing and improving the strengthening the risk management measures in government soverign debt management.Former first economy advisor of IMF president, Mr. Mussa pointed out that the problem of payment in arrears for the external sovereign debt put Argentina slipped into an embarrassing situation of bankruptcy from a country with the ability to borrow large amount of capital in international capital market. This example explains the problem of debt crisis originating from the lacking of prudential management of government external loans and the inconsonant efforts between policy and reality.Government external soverign debt management is a complicated system project. The scientific management of government external debt accommodates the tides of globalization is the way to prevent and relievate the financial and economic crisis in order to stabilize the social and economic security of the whole nation, together with take an initiative to adapt to the changing international financial system. To strengthen external soverign debt management would benefits the macro-control capability, deepening of social marketing system and the development of national economy. Follow the above logic of thinking, the paper fistly carries research on the general definition and mechanism of the government external debt management. Secondly, exploring the specific types, factors and inflences brought by the government external soverign debt risks; Thirdly, Taking a look into the practical research on the risk types of the Chinese government external soverign debt and the operation mechanism. Fourthly, the importance of the strengthening of the external debt management measures and the establishment of a supervision system for external soverign debt risk management, based on the exploration of the current adjustment between the external soverign debt management and the macro-control situation.This paper is trying to explore the internal relationship between the nature and appearance in the field of government external sovereign debt management, and to find measures and instruments to strengthening the Chinese government external soverign debt management, according to the author's practical experience and the materials in hand. To reach a wholesome external soverign debt management also relies on the reference from outside experience and coordinate of every side.Through the theatrically analyzing a large number of books, combined with the real practice over 20 years, we try to propose on the completion and the enhancement of the external soverign debt risk management, which is of great importance to the domestic economy growth and the establishment of the socialism market economy.With the experience on the research of the government external soverign debt management, the author proposes to take initiative to take the increase or decrease in the amount of external soverign debt into consideration of leading the overall national economic level up or down correspondingly, in order to creating a in harmony and healthily the economy environment. On one side, to effectively prevent and mitigate the debt risks through the means of underscoring the management, borrowing external soverign debt as a basic measure to stimulate the economy development and an important impetus for the economy increase. On the other side, to realize the economic objectives from the actual result of utilizing external soverign debt as an vital way in pulling economy and keeping away financial risk, through the open and elastic management, conjoining fiscal policy and monetary policy.During the process of thesis draft, the writer wondering the painful duration of debt crisis, as national creditworthy harmed, living standards lowered down, and economy slipped. All above might explain the reason to put the risk management of soverign debt into agenda.