The Financial Risk Early-Warning Analysis Of China

With the development of global economic integration and liberalization,modern financial sectors have become the core of society. And that, thefinancial risks have turned to be many governments’ major problems, so didthe developed countries. Under the open policy conditions, as the financialactivities become more flexible, the financial innovation more complex,theworld are more uncertain resulting that the financial risks are rising day byday. The financial risk will evolve into financial crisis when they accumulated toa certain extent. If that, it would not only cause the global economic recession,also social crisis or even political crisis. In recent decades, many countries andregions in the world have erupted financial crisis, take the1980s for example,there were Mexico’s Currency Crisis, Argentine’s Debt Crises, EuropeanExchange Rate Crisis, Asia Financial Crisis, Collapse of the Russian Rubles,and the US sub-prime Crisis etc.For China, the economic growth has maintained a high rate for many years,even in2009, under the background of global economic recession; it was stillup to8.7percent.But what about China’s financial risk in the end? TheChinese government and academics are all very concerned about it. At thesame time, China has become one of the world’s major economies because ofits huge ecnomic scale, and it plays a more and more important part in theworld. As a result, the financial risk in China has also become one of the majorconcerns for the international community.This paper is on the basis of the previous research on the financial riskswarning. Firstly, combed the principle of financial crisis, and combining with theparticularity of China’s national conditions, this paper improved the indexsystem of KLR signal analytical method, and constructed a special financialrisk early-warning index system for China; Secondly, empowered for thefinancial risk early-warning indicators using Entropy method, and thenestablished a comprehensive early-warning index; Again, displayed andevaluated the financial risks during the1995-2009in China using thelights-interval, then forecast the financial risks for the next two years makinguse of ARMA models and GM methods; Finally, put forward some relatedsuggestions against financial risks for government’s decision-making,including further promote the reform of our financial system and property rights,improve business model and the transparency of financial system, unifysupervision, strengthen the construction of financial law, establish theMacro-financial risk early-warning mechanism etc.