Research On Local Government Debt Risk Early Warning In China

Since2000,the request for developing the economy in China has encouraged the local government to invest in the local Infrastructure through borrowing a lot of debt. The investment on local infrastructure has played a n important role on local economic development, but also has allowed local government to bear the heavy debt burden. During the2008financial crisis, the implement of the4trillion economic stimulus plan made the risk of local government debt surfaced. The crisis in Greece and other countries made more and more people realize the powder of borrowing bebt. An appropriate size of the government debt can effectively promote local economic growth and social development, but over reliance on debt will increase the government’s compensation debt burden, and even affect the normal operation of the local government. Therefore, how to effectively monitor and assess the risk of local government debt, and implement the necessary responses, have become the urgent need to address the problem for the government.At the beginning of the paper, on the basis of reviewing the research results on the local government debt risk warning mechanism at home and abroad, we define and classify the concept of the government debt and the risk of the government debt. Then the paper will discuss the theoretical framework of local government debt risk warning. Secondly, the paper will discuss the status quo and the risk of local government debt, and analyze the formation mechanism of local government debt risk. Thirdly, the paper will choose the debt data from12provinces and use the factor analysis in SPSS software to analysis the real risk of their debt risks. At the last part of the paper, we will conclude with the construction of the local government debt risk early warning system, and give some suggestions on how to control debts, how to improve the solvency of the government and the management capacity of government debt.