| Our country is now in progress of urbanization, and local governments face to a great demand of funds in investing infrastructures. Financing on debt by local governments is not allowed in accordance with the National Constitution. How to raise funds for the requirement became a common issue for local governments on all levels. Therefore, a financing platform by companies for local government fund-raising has been emerged. The incomplete statistics of relevant departments show that, up to the end of the third quarter of 2009, over 3000 urban construction companies have been established by local governments for fund-raising and over 5 thousand billions RMB yuan have been raised. The platform critically contributed economy and society development. However, attention should be paid to that, by the financing platform, some local governments have run over-borrowing nearly to the utmost limit. Ended by 2009, among the 31 Provinces (or Municipals or Autonomous Regions) with statistic data, only Heilongjiang, Inner Mongolia, Xinjiang, Tibet, Shanxi, Henan, Guizhou, and Ningxia, Rate of Debt (ROD, total debt of the platform dividing by provincial GDP) is less than 60%, but in 10 provinces, it is even over 100%, while average Rate of Assets Profit (ROA) is less than 1.3%, and the platform on county level has little profit. Since funds are raised mainly by bank-loan with feeble ability of repayment, enlargement of local debt threatens financial stability of the nation. Thus, regulating the running of the platform of local governments becomes urgent job.Laying stress on description of Lanzhou Urban Development Investment Company with its framework, manner of fund-raising, ways of operation and existing issues, this paper analyzed types of the platform and financing channels. On the basis, the paper proposed improvement measures in regulating mechanism and management system, preventing and controlling potential risks, etc. |
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