The Financial Risk Evaluation And Early Warning Study Of China Based On Modified KLR Model

The Asian Financial Crisis in1997and global financial crisis triggered byAmerican sub-prime mortgage crisis in2008, have had huge impacts onthe world economy. Financial crisis are of destructive power and outburst,which prompt us to pay a great attention to crisis predictability in theprocess against financial crisis. It is much more important to evaluatefinancial risk and build a financial crisis warning model than to deal withthe financial crisis. Therefore, it is of great importance to evaluate ourfinancial risk and build a financial crisis warning model that conforms tothe situation of China.First of all, this thesis analyzes the importance of building a financialcrisis warning model suitable to China. Then it contrasts the presenteconomy of China with bubble economy of Japan in the1990s, findingthat there are many commons on economy of these two countries. On thebasis of contrast, the author concludes that the fixed assets investment toGDP ratio is also an important indicator of financial crisis. This thesismodifies the KLR model from indicator system and model itself. Becausethe exchange rate cannot reflect all the information of external debt, onthe basis of original KLR model, this thesis draws into external debt indicators and establishes an indicator system including12indicators.According to the feature of noise-signal, this paper modifies theproportion of comprehensive indicators in model and reduces theproportion differences between the indicators.The author applies factor analysis to evaluate the financial risks ofChina. Three common factors, which are financial market risks, globaleconomy risks and macro-economy risks, have obvious impacts on thefinancial crisis. According to the demonstration study of our country, thethesis concludes that present economy of China is in relatively safeintervals and financial crisis will not happen in a short time. However, thecomprehensive indicators are close to the cordon of financial crisis in thelatest two years. It means that there are some safety bidden troubles in theeconomy system and reminds us that we must prevent financial crisis.Specifically, combining with the conclusion of the factor analysis, thefinancial risks of China are rapid credit growth, huge non-performingloans, too fast appreciation of RMB, too high fixed assets investment toGDP ratio and so on.According to the conclusion of demonstration study, the last part ofthe thesis puts forward some policy-related suggestions, including strongly supervising financial mechanisms where the banks are mainparts, changing the economic development strategy led by export, andkeeping the macro-economy balanced as a result of optimizing theindustry structure and improving the investment environment, and so on.It is of theoretical and practical significance to carry out these policies, inorder to prevent financial crisis more efficiently in China.