What are Partial Public Financing Systems?

The local government investment and financing platform refers to companies established by local governments at all levels with financing as the main business purpose, including different types of urban construction investment, urban construction development, and urban construction asset companies, etc. , Public facilities charges and financial funds as sources of repayment.

Government financing platform

Local government investment and financing

Because the local government financing platform is an economic phenomenon peculiar to China, there is no special literature on it. In domestic practice, although financing platforms have been around for some time, their definitions have not been unified. They are broadly divided into broad and narrow senses.

The broad concept of financing platforms includes various types of investment and financing companies formed by local governments, such as urban construction

Government financing platforms are divided into the following categories: One is a single financing platform, which is responsible for public welfare and basic project financing, fund allocation, and principal and interest payments, and does not participate in project construction and operation, such as Hefei Construction Investment Holdings (Group) Co., Ltd. The second is a non-profit investment and financing platform that is responsible for financing, construction, operation, and principal and interest payment of non-profit projects; the third is an operational investment and financing platform that is responsible for basic project financing, construction, operation, and principal and interest payment. Investment in other operating projects and financial investment; Fourth, a comprehensive investment and financing platform, which has the characteristics of both public welfare and operating platforms, such as Jilin Province Investment (Group) Co., Ltd .;

The local government financing platform is a product of a specific stage of China's economic development and is a ubiquitous thing. A local government financing platform refers to an economic entity that is established by local governments and their departments and institutions through financial appropriation or by injecting land, equity, and other assets, undertakes financing functions of government investment projects, and has independent legal personality. The basic function of a local government financing platform is: to support government credit, to implement government policies, to raise funds directly or indirectly with compensation, and to invest funds in areas, industries, and projects that require urgent development. According to the 2015 Research Report on the Operation Mode and Risk Management of Chinese Government Financing Platforms, the role of local government financing platforms is as follows:

1. Local government financing platforms can allocate resources more effectively and promote economic growth

On the one hand, the government uses its credit platform to improve the integration and utilization efficiency of government resources; on the other hand, under the background of increasingly fierce competition and high loan risks, banks are also willing to lend to investment-financing platform companies with government background in order to Reduce financial risk. In recent years, local investment and financing platform companies have contributed to China's economic growth rate. Due to the imbalanced economic development in eastern, central and western China, the eastern industries need to be transformed and upgraded. The central and western regions are eager to undertake the transfer of eastern industries. Investment and financing platform companies' huge investment in transportation and urban construction has effectively promoted China's industrial transfer. Conducive to the balanced development of China's economy.

2. Local government financing platforms have greatly accelerated the process of urbanization

Most of the funds raised by investment and financing platform companies are used for urban public infrastructure construction. It is safe to say that without local investment and financing platform companies, China's urban landscape has not changed with each passing year. The great development of urbanization has provided a long-term solid foundation for local economic development, created a source of demand for industrialization, and expanded the space for rural population to move to cities and towns.

3. Local government investment and financing platform companies have promoted improvements in people's livelihood

Relying on the investment and financing platform company, the local government has raised a large amount of funds, a considerable part of which has been invested in affordable housing projects such as low-rent housing, public rental housing, and shantytown renovation. For infrastructure and water conservancy infrastructure construction, a part of the funds was invested in sewage treatment plants and pipeline networks, waste incineration plants (landfills), and water environment treatment projects. The construction and use of these projects have effectively improved people's livelihood and have been welcomed by the people.

4. Local government investment and financing platform companies are also conducive to stimulating private investment

The local government investment and financing platform company is a government-owned enterprise with legal personality. It can attract private capital by issuing trust fund plans, corporate bonds, joint investment, etc., and give full play to the role of private capital in supporting infrastructure and people's livelihood projects. The good combination of short-term policy regulation and the long-term mechanism of utilizing private capital.

After the government financing platform project is launched by local governments, the hidden risks are being continuously questioned by the market due to the special nature of its repayment sources. After the credit boom in 2009 and the "four trillion" investment stimulus, the financing scale of the financing platform showed a relatively fast and high growth. If it cannot be handled correctly, it will bring potential financial risks or financial risks.

The reform of the tax sharing system in 1994, on the one hand, objectively strengthened the financial power of the central government, weakened the financial power of local governments, and the imperfect transfer and payment system, which also directly affected the financial power of local governments; on the other hand, local governments The government has to bear a lot of public affairs expenditure.

In this case, the relative lag in the conversion of the local government's debt mechanism and the reform of the system, coupled with the pressure caused by insufficient local available financial resources, have caused

At present, the Ministry of Finance and the People's Bank of China are taking the lead in investigating and researching this situation, and properly handling the issue of financing platforms.

First, maintain a reasonable investment scale and reasonably arrange government investment. Premier Wen Jiabao has clearly stated in the government work report that it is necessary to further optimize the investment structure, control newly started projects, and focus government investment on projects under construction, continuing projects, and closing projects, that is, To maintain a reasonable scale of investment, and not to expand investment blindly beyond your own tolerance. This can alleviate the pressure of local investment, or the pressure of raising funds, to reduce the financing scale of the financing platform.

Second, we must standardize financing behaviors and adhere to our means. According to the economic development status of each place and the state of fiscal revenue, reasonably determine its own financing scale. Do not expand infinitely, blindly pursue financing, and further standardize management. The Ministry of Finance is leading the study of specific measures.

Third, we must strengthen supervision. It is necessary to strictly follow the central fiscal and taxation policies, financial policies, industrial policies, and investment policies to determine the needs for investment that may occur in various places and the need for funds. Fiscal and tax policies and financial policies have put forward some restrictions. For example, for some production capacity of "two highs and one capital", for some excess capacity, its financing should be strictly controlled. For some new projects, strict review is required. By strengthening supervision and controlling the scale of its financing, this eliminates potential fiscal and financial risks.