Several explorations on how to construct an early warning system for local government debt risk in China

Abstract

This paper aims to explore several ways to construct a scientific and comprehensive early warning system (EWS) for local government debt risk in China. In order to achieve this goal, this paper studies the local government debt risk from multiple perspectives, i.e., individual risk, contagion risk, static risk and dynamic risk. Firstly, taking China’s 30 provinces over the period of 2010~ 2018 as a sample, this paper establishes early warning indicators for individual risk of local government debt, and uses the network model to establish early warning indicators for contagion risk of local government debt. Then, this paper applies the criteria importance though intercrieria correlation (CRITIC) method and coefficient of variation method to obtain the proxy variable Ⅰ, which combines the above two risks. Secondly, based on the proxy variable Ⅰ, both the Markov-switching autoregressive (MS-AR) model and coefficient of variation method are used to obtain the proxy variable Ⅱ, which comprehensively considers the individual risk, contagion risk, static risk and dynamic risk of local government debt. Finally, machine learning algorithms are adopted to generalize the EWS designed in this paper. The results show that: (1) From different perspectives of local government debt risk, the list of provinces that require early warning is different; (2) The support vector machines can well generalize our EWS.

National Audit, Media Attention, and Efficiency of Local Fiscal Expenditure: A Spatial Econometric Analysis Based on Provincial Panel Data in China

“…Auditing the allocation, implementation, use, and management of the government budget improves the performance of fiscal funds as well as the budget execution ability at the unit level [4], thus improving the efficiency of local fiscal expenditure. A national audit not only positively affects local government debt risk [5,6], fiscal security [7,8], budget transparency [9], fiscal revenue, expenditure violations [10][11][12], budget management [13], budget violations [14], and fiscal sustainability [15] but also has a positive governance effect on local fiscal expenditure efficiency [16,17].…”

The spatial heterogeneity of public health resources: a study of the socioeconomic, demographic, and natural geographic conditions of ethnic minority regions in southwestern China

“…Public hospitals are invested in and organised by local governments; one problem with this model that cannot be ignored is that the strength of the investment is impacted by local financial revenues. Although numerous researchers have greatly evaluated how financial investments in healthcare resources can achieve operational equilibrium, higher debt risk remains one of the most important considerations for local governments before making investments [24], which is why the crucial association between the number of beds per capita and general public revenues is reflected in this study. However, this is critical only in the more economically favourable local areas of the centre, the south and the southeast.…”