Research On Financial Risk On Financial Resources Of Local Government Competition

Since China’s fiscal decentralization, there is the fiscal strain caused by the inequality between local government financial authority and power, coupled with the local government’s main body role in the local economy is invariant, local governments face huge financial pressure. Under the effect of the GDP’s performance evaluation system, the local government is actively to seek outside funding available financial resources. Because of the important role of financial resources for economic development, local governments tend to spare no effort through direct intervention or indirectly affect to compete for the financial resources. Especially in 2008, the number and size of the development of China’s local government financing platform is become big rapidly, but the size of local debt of financing platform also expand rapidly, local governments debt is increasingly large. Excessive debt makes local government debt has increased credit risk, under certain conditions, may even translate into financial risks, impact on China’s economic development.This article from the local government changes in behavior, analysis the influence of local government’s financial resources competition in the regional distribution, come to the conclusions that China’s financial resources unevenly distributed in various regions due to competition among local governments. Followed by a discussion of the debt risks arising from local government’s financial resources competition and research the relationship between debt risk and financial risk as well as the possibility of debt risks into financial risks, come into a conclusion that debt risks come more translate into a financial risk in China in recent years, and the Midwest’s debt risks is more easily transformed into financial risks. Then, based on principal component, analysis evaluation of the regional financial risks, through the establishment of local financial risk evaluation index system, and then calculate the size of the 2013 regional financial risks of using principal component analysis, and sorted according to the composite score. Based on empirical results 2013 in central and western regions of China’s financial risk is greater than the results of the eastern region. Finally, the establishment of local policy financial risk early warning system, to establish a correct view of achievements of local government, improve local government debt management system, accelerate financial development in central and western regions, the establishment of a deposit insurance system and the establishment of effective local financial regulatory system, to achieve the transformation and upgrading of local economic growth based on the conclusions of proposal to reduce financial risks, prompting steady development of China’s economy.