Research On Financing Mode Innovation Of Local Government Financing Platform In H City

Since 2008, the Local Government Financing Platforms (LGFP) of our country have shown the rapid ultra-development.The Opinions of the State Council Concerning Strengthening the Management of Local Government Debt clearly regulates that the financing platform company shall be deprived of the government finance function and cannot add government debt. It means that management of the local government debt and borrowing mechanism will be straightened out gradually, and the Financing Channels will be diversified.The LGFPs in H city have been developing rapidly but they rely excessively on bank loans in their financial structure. This kind of single and narrow Financing Channel will shift excessive financial risk to the banks. If the LGFPs cannot access to adequate and sustainable loans from banks because of the tightened monetary policy, the constructions of projects will be under the influence and lead to the risks of capital recovery. To further improve the financing capability of the LGFPs in H city, we must make deep research into the current problems existing in the traditional financing model, and explore some ways to resolve the current problems of the management of LGFPs in H city by combining domestic and foreign advanced experience.First of all, this paper analyzes the Bank Loan and the Debt Financing which are two common traditional financing models. It also summarizes some problems exist in bank loan financing model, such as pressure to repay loans, unsoundness of repayment mechanism as well as repayment difficulties, and other problems exist in the debt financing model like unreasonably high bond rating and unreliable implicit guarantee. Next, this paper analyzes and introduces the historical evolution, sources of capitals, financing channels and investment directions of H city. In order to prepare the environment analysis and background for the further research on the innovation of H city’s financing model, it carefully studies the finance practices of local governments in America and Britain and the development features of the city investment corporations in Beijing, Shanghai, Chongqing and other places. Finally, combined with the financing environment analysis of the LGFPs in H city, this paper preliminarily proposes the strategy of financing, the innovative financing model, the focuses of financing, as well as the implement approaches.This paper believes that the measures to implement the Innovative Financing model in the H city’s LGFPs are to enhance competition in the market to make the market play a part in corporate governance, to achieve the separation of government and enterprises to make the stakeholders’ role in the governance of the LGFPs come into play, to regulate the financing behaviors of the LGFPs, and to innovate the incentive and restraint mechanism for theLGFPs operators.