On The Research Of Assessment With Default Risks Of Local Governments’ Debt

Local government debt which has theoretical basis is the general way to develop the local economy. However, inability to offset debts with assets, Detroit’s seeking bankruptcy sounds the alarm to the world, especially to China. After the system of tax distribution reform, government in China always conforms with financial imbalance. What’s more, unreasonable classification of routine and financial power makes it facing huge test in development of local economy. In addition, assessment of GDP growth, debt repayment liability borne by the next official leads to more civil government debt and the rapid expansion of the scale of debt. Debt without dealing in a good way, may evolve debt crisis, affect the operation of the whole macro economy and even hurt the social stability. So how to solve it becomes the hot topic and the difficulty in front of the civil government.At present, The debt risk prevention has been one of the main tasks of our economic work in the central economic work conference of China. And scientific evaluation of it is an important precondition to prevent and dissolve the debt risks. This article taking Guangdong province as an example, combined with government debt issued by the bureaus of the audit data of guangdong province in 2014, gives a brief summary of guangdong local government debt’s scale and structure, analyze the reasons for the formation of local debt risk on the basis of summarizing predecessors’ research achievements. And then it estimates the fiscal revenue and income growth and volatility of guangdong province of 2016 and 2017 according to statistics from 1994 to 2014. This article makes empirical analysis of expected default rates and the scale of debt repayment that local finances can bear in 2016 and 2017 by making using of KMV model. Last but not the least, this article put forwards corresponding proposal and outlook in the future research.This study found that, under the guarantee rate of 40% in 2016, local government debt expected default rate is 1.0114%, over reasonable expected default rates while in other guarantee proportion in 2016, the expected default rate of civil government debt is far more below than 0.4%.Meanwhile, whether the guarantee rate is 40% 、50% or 60%, civil government debt is below 0.4%. Thus it can be seen that the default risk of civil government debt is almost 0 in 2017.In the process of analysis, the target of risk assessment of KMV model expanded from the local government bonds to debt of local government that is liable for repayment, is an innovative point in this paper.