Abstract: Based on the panel data of 30 provinces in China from 2008 to 2018, this paper measures the local government debt risks from three aspects of explicit, implicit and comprehensive debts. It also uses spatial Durbin model (SDM) to study the spillover and aggregation effect of local government debt risks on the regional financial risks. The results show that China’s regional financial risks present a significant feature of high-low aggregation distribution, with the highest in the eastern region, followed by the western region, and the lowest in the central region. The three types of local government debt risks can all significantly drive up the level of regional financial risks in the jurisdiction. The increase of the implicit and comprehensive debt risks of local governments can significantly lower the level of regional financial risks in the adjacent areas, making the regional financial risks in the adjacent areas transfer to the inside of the jurisdiction. The results of further study indicate that the reason for this phenomenon is that when the financial resources of the local governments decline, the regional financial risks accumulate by themselves within the regions and lead to the transfer of regional financial risks among the neighboring regions. Therefore, it is suggested to govern the regional financial risks from the following three aspects: firstly, to pay close attention to the regional financial risk aggregation in the eastern region; secondly, to regulate the borrowing behaviors of local governments, completely cut off the way of implicit borrowing, and gradually digest the stock of implicit debts; finally, to further release the financial power of local governments and promote the matching of financial power and administrative power of local governments.

Key words: local government debt risk, regional financial risk, risk aggregation, local government financial resources