?Credit Spreads, Default Probability and Debt Risk Measurement of Prefectural Governments in China
- ?DIAO Weitao, FU Jinyi & LI Huijie?
- ??DIAO Weitao, FU Jinyi (Qingdao University of Technology, 266520)LI Huijie (CSCI Pengyuan Credit Rating Co., Ltd., 100005)
In this paper, the concepts of default probability, loss given default and expected loss in internal rating method are introduced into the assessment of local government debt risks. Based on the issuing interest rate and credit spreads of provincial government bonds, the default probability models for general debt and special debt are constructed and estimated, and the general and special debt risks of 333 prefectural governments in China from 2014 to 2017 estimated respectively, and the regional distribution and changes of these risks analyzed. The conclusions are as follows: Both general and special debt risks are different among regions, and are increasing due to the increasing debt scale, the change of default probability is not obvious, and furthermore, the debt risks are concentrated in a few prefectural governments. The general debt risks account for about two-thirds of the total debt risks, the special debt risks about one-third, and this proportion structure was basically unchanged between 2014 and 2017. Based on the above conclusions, this paper puts forward corresponding policy recommendations for governance and control of local debt risk.
- Local Government Debt Risk, General Debt, Special Debt, Credit Spreads, Probability of Default