Risk Management of Local Government Investment and Financing Platform: Evidence from China

Abstract

With the rapid development of local government investments and financing platforms, risks due to rapid debt increase have put governments and banks under pressure, these pressures can have very serious consequences. Based on the case study of Henan Investment Group in China, this paper aimed to identify possible risks in Henan Investment Group by evaluating local government investment and financing platform assets. Based on VAR-based Credit Metrics model, the risks of Henan Investment Group were measured and found that its debt risk is being placed in a relatively safe state. But there are still some problems, leading to potential security risks, later corresponding countermeasures to control these risks were proposed based on empirical analysis.