The Stability Of Fiscal Revenue And The Risk Of Default On Local Debt

In November 2016,the introduction of The Local Government Debt Risk Emergency Response Plan can be called a warning signal.This is not only an early warning of the current local debt risk which is too high,but also a good warm-up.According to the data of finance ministry,by the end of 2015,Chinese local government debt was 16 trillion yuan,local government debt remains high.And weak solvency in some areas,the risk of individual areas over the cordon,illegal financing guarantee phenomenon occurs,some irregularities in the PPP project and so on.Besides some local government borrowing,whether also only shop booth to sell over reliance on debt,boost the price of high prices,increased land acquisition,demolition contradictions,caused state-owned assets shrink or even loss.At the same time,several rating agencies of our country on the local government debt was AAA,indicating that the same debt rating reflects different local governments have no substantive difference.As we all know,the financial situation and the economic situation of different places are different,so the results of such a high and consistent rating have to question the objectivity and authenticity of the ratings.With the local government had no difference between the AAA rating reflects the market back,illustrating the effect is not prominent.Under the new norm,with the expansion of economic growth pressure,once local debt and local risk outbreak,it is most likely to appear the domino effect".The above reasons have leaded to the rapid expansion of local government debt,because of local government bonds in China has a short history,we lack corresponding experience,in the local government fiscal revenue stability,default risk in the local debt issue on different scale and the relationship between revenue stability and local debt credit default problem have not paid much attention.This paper firstly illustrate the phenomenon of the legal basis of local government financing by issuing bonds and higher local government debt rating inflated,these three aspects are the background of local government debt financing,and then describes the development process and the development status of the local government debt,and then select 2000-2015 year's fiscal revenue of the 11 provinces and cities in eastern China,applicating the Stata software to predict the data of fiscal revenue in 2016,and then calculated the theory of default rate of the 11 provinces and cities in eastern China by using KMV credit risk control model.Through the combined method of theoretical and empirical analysis,we draw the following conclusions:the local government debt overall default risk is not high except Liaoning province;local government bonds rating exist "inflated"phenomenon;there are larger fluctuation and increasing default risk after adding the government fund income in fiscal income;fiscal revenue ehich is based on local landfinance is unstable and unsustainable.In view of this,we put forward the corresponding policy recommendations from three aspects:local government,national level,and intermediary organizations.From the national level,we should improve the local government tax structure to stabilize local revenue,improve the transparency of government information and pay attention to local debt in the laws and regulations on the system construction;from the local government level,we believe that local governments should combine local revenue with local debt issuance scale and cooperate with the market to promote the healthy development of PPP model;from the intermediary level should improve the local debt rating system to optimize the local debt rating method,and strengthen the credit rating industry system construction and strengthen credit rating industry regulation.