The Research On Credit Risk Of Local Government Bond In China

After long-term development, local government bonds abroad have a mature operation model and perfect risk management system. In2009, the Ministry of Finance issued200billions of the local government bonds. In2011, Shanghai, Shenzhen, Zhejiang province and Guangdong province tried to issue bonds on its own. Local government bonds, especially its credit risk received extensive attention of domestic scholars. Local government bonds are bonds issued by local government, to raise money used in municipal construction, public security, infrastructure and natural resources protection etc. In the United States, states and local governments to issue bonds referred to as municipal bonds. Japan’s local government bonds are called local bonds. In this paper, the local government bond is similar to Japanese local government bonds, as direct local government debt.Credit risks of local government bonds are next only to the national bond. Because of macro and micro factors of uncertain, the local government is willing to but have no ability to repay the principal and interest in full, so this will lead to credit risk. The safe scale of local government bonds is that credit risk is lower than a critical value.With the financial system reform in1994, the local government revenue to total revenue ratio fell sharply. At the same time, the local government fiscal expenditure grew fast, leading to a sharp rise in the fiscal gap. In order to make up for a lack of finance, the local government increased reliance on land transfer fund financing and investment financing platform. However, with regulation of the central government to the real estate market, the2011annual national land transfer income had a sharp decline. At the same time, the central government began to clean up the local government financing platform. So the local governments need to find alternative ways of financing. The successful experience of local government bonds in tens of years abroad had given a clear answer. Predictably, the future of China’s local government bond market will develop steadily. The size and the number of issuers will be synchronized growth, so we need to study our country’s local government bonds and its credit risk. For local government, the security issue scale is of great significance. This is the starting point of this paper.The first chapter is the introduction, an overview of the research background and significance, research object, research method, structure arrangement and the innovation and insufficiency.The second chapter is the literature review of the relevant theory and research on local government bonds.The third chapter introduces the local government bonds in China, emphatically analyzes the realistic basis of China’s local governments bonds and the status of supply and demand.The fourth chapter selects the representative of the federal system and unitary state-the United States and Japan. Two countries are analyzed in detail in the operation modes and the risk management systems of the local government bonds. The paper puts forward some suggestions in combination with the reality of our country.The fifth chapter is the focus of this paper, by using the KMV model make empirical analysis of credit risk and safety scale of local government bonds in China.