Government Debt Risk Evaluation And Analysis In The Context Of National Economic Security

With the development of China during the Economic Reform and Open Up,the accumulation of government debt proceeds while China’s economic booming achieves rigorous result.According to the international experiences and related researches,the high level of government debt will decrease the potential of one nation’s economic growth.Thus,it becomes a crucial problem that evaluating the risk of government debt and forecasting the risk’s evolving trend,in order to ensure a healthy economic growth.This research is a sub-project of National Economic Security Evaluation and Forecast in The Context of Bigdata founded National Social Science Financial of China.Due to its significance of government in social and economic,research on government debt risk would assist the theory building of national economic security.Based on previous researches on government debt and the analyzes of China’s fiscal-taxation structure reform,the paper reviews the course of Chinese government debt’s accumulation.The fact that recent transferring of local government debt from bank loans and other forms into government bonds is affirmed in this research.With the background of securitization government debt,focusing on central government debt risk alone no longer suits the current debt structure.As liquid asset,government bonds can influence the credibility of government and the action of default.Thus ignoring government bonds in the analysis of government debt risk could be dangerous.And current related researches treat government bond as risk-subject,yet have not considering its financial properties.And those researches lack connection with traditional research methods.Thus,data mining techniques methods are employed in the risk analysis of the high frequency government bonds data.And those are synthetically integrated in the final government-debt risk evaluation system with the traditional research angle focusing on fiscal finance.This paper reviews current debt related theories,focusing on debt related economic and finance theories.And government debt and bond risk theories are also reviewed.Contemporary research holds the conviction,that government debt and economic growth has a relation of ‘upside down U shape’.That meaning there is an optimal interval of debt level.And crossing the interval will result in economic growth slowing down or even recession,which reindicates the significance of government debt risk.With the understanding of those theories,the research method is determined.In the risk evaluation scheme,CRITIC and Entropy Method are applied to calculate the weights of evaluation indicators,which allow the evaluation structure to an objectively risk evaluation.Meanwhile,Support Vector Machine and K-means methods are employed to probe on bonds’ risks.With the introducing of the methods,the gap of researching on bond market in government debt risk evaluation is filled.Concepts and definition related to financial security are defined.Under the scope of national and economic security research,the essence and understanding of financial security are confirmed.After reviewing debt crisis in history and the complication of debt crisis,sovereign debt crisis in history is reviewed,especially the cycle of south American debt crisis.And according to the analysis of the most recent impact,the European Sovereign Debt Crisis,economic integration brings labor mobility.That destabilizes the balance of labor markets in different regions,resulting in financial and fiscal problems of some regional economy.This inspires reflections on imbalanced regional development of China and government debt risks’ geographical distribution.Based on the examples above,it can be cleared that government debt problem has geographical or regional properties.Thus,it needs to bring local government debt analysis into the overall evaluation scheme when researching on government debt problems.Government debt related concepts are discussed in categories,including central government and national debt,local government and local debt,bond market and Chinese government bonds.Because in the three categories,the subjects are nation states,local government and government bond.Their properties and natures vary,making them needed to be discussed separately and thoroughly.On the basis of related concepts be cleared,this paper defines the outcomes of government debt problem into two categories with observation on China: the direct impacts,including debt selfreinforcing,reduce local government’s strategy space and slow down economic growth;and potential impacts which includes,credibility crisis after national debt default,risk transferring from bond market to other financial markets,and weakening nation state’s strategy capacity.Those consequences are significant for economy from short term to long term.Without funding from outside,it is difficult for a nation to recover from debt crisis.And that is extremely hard for a large economy such as China.And also based on China’s condition and her developing course,the cause of debt climbing-up are concluded: the unbalanced fiscal,results from taxation system adjustment and the accelerating investmentdemand from urbanization;macroeconomic elements that population aging,salary divergence by urbanization,and the defects of local administration;financial elements,that interest rate liberalization and easy money policy.And the third category above affirmed the government bond as a financial instrument that deeply involved in the money market needed to be included in government debt risk evaluation.With the understanding of debt growth,government debt risk evaluation system can be constructed.After reviewing international organizations and financial institutions’ attention on debt problem and the research goals aimed to achieve in this paper,the government debt risk evaluation system is constructed with three subsystem which focus on:1)the risk of national debt;2)the risk of local government’s debt;3)risk in government bonds.In the evaluation on the risk of government bonds,EWMAVa R and SVM method are applied to measure the interest risk and stability risk.And foresight indicators are investigated in the system,in order to estimation the change of the overall government debt risk.Based on the evaluations about the three subsystems,below are discovered:1)the national debt risk of China is currently in risk;2)risk of local government debt is increasing rapidly,and already exposed in severe risk;3)government bond is on the edge of risk,that could be controlled in short-term;4)yet according to foresight indicators,the fiscal balance of China may not be improved in few years ahead,and the money policy is tightening up,those go against the control of debt risk.And the analyze on risk of local government debt suggests: the risks local government debt shows a strong geographical pattern,that the closer to inland the higher debt risk.That pattern also fits with the provinces’ divergence of labor cost,which accords with the findings from researches on Europe debt crisis: labor outflow will increase the regional government debt level.Results above suggest China government debt is already in risk in the years of 2018 and 2019.And in short future,the debt risk will continue to increase.That brings challenge on controlling China debt level and its risk.Based on current situation and debt risk level of China,and in order to counter the effect of high debt level and turn the situation around,advices are proposed:1)in short term,sustaining the current cautious monetary policy while cutting down fiscal expenses;2)reinforcing the fiscal transfer system and making sure it is spent on livelihood and economic issues,and help the fiscal and monetary policy work together that would increase the quality of both policies;3)in the long run,based on the development to technology level,the structure of administration can be simplified which can be helpful on the issue of fiscal spending control.Also,an afterward-management protocols after local government bond issuing is proposed,which advocates allowing local-bond be able to default with welldesigned procedures.That could increase the cost of overborrowing,and ultimately can contain the disorderly growing trend of local government bond.Ultimately,containing the climbing government debt risk can be achieved.Because due to the impact of Covid,nations around the world suffers the increasing of overall debt level.That indicates the relative risks of government bonds are in dynamically fluctuation.That would bring more time to optimize debt structure and to lower the overall government debt risk.