A Study Of The Local Government Financing Platform’s Financing Strategies Under The Austerity Policy

The Chinese government has been adopting a positive financial policy and a proper loose monetary policy since the year of2008to deal with the international financial crisis. Along with this, the government has also pushed out an extension plan of investing4000billion RMB in two continuous years. During this period, the local government financing platform company developed dramatically in both its number and its scale. Being a main channel for the local government to finance, the government financing platform company combines with the nation’s macro-control policy actively and integrates public recourses, which has not only provided finance support for the building of the local infrastructure, but also accelerated the progress of industrialization and urbanization as well as made significant contribution to the development of the local economy.On the basis of studying relative theories on financing, this thesis analyses the development history, the present circumstance of local government financing platform companies and problems they are facing. With LQGT Company----a county government financing platform company---as the study case, this paper analyses the history, the governance mechanism and the operation mode of government financing platform companies. In addition to this, the dissertation also discusses how to extend financing channels, optimize the structure of financing and reduce the cost of it. Furthermore, this thesis aims at providing new thinking for building a normative and effective financing system.There are seven parts in this paper. The first part is the introduction part, which presents the background, the purpose and the significance of this study, laying a foundation for the rest part. The second part is the literature review part, reviewing the theoretical research results on government financing platform companies presented by domestic experts and elaborating the main points as well as the deficiency of this paper. Part three makes a summary of financing theories, introducing the concept and the classification of it and three sorts of financing theories in present mainstream. The forth part talks about the development history and present situation of local government financing platform companies, analyzing the history, present circumstance, problems of local government financing platform companies and macro finance situation it is facing. The next part studies the present situation and problems of LQGT Company, introducing the company’s basic situation, business scope and present financing situation, making an analysis on the main problems occurring during its financing process. Part six gives some advice on the financing strategy of LQGT Company on the basis of analyzing the present financing situation of it, such as how to select financing object and financing product, how to control the risk and position its market strategy. The last part makes the conclusion and presents suggestion from the angle of the government financing platform company, the government and the financial institution separately with the purpose of creating a benign development circumstance for government financing platform companies, and it also points out the deficiency of the study.The main contribution of this thesis lies on its deep analysis on both the international and the domestic financing situation faced by the local government financing platform company, and its high maneuverability on financing advice since it has presented pertinent suggestion on the selecting of financing channels and financing products from the problems faced by the study case of this paper---a county government financing platform company---caused by the tight credit policy during its financing process. At the same time, this dissertation also presents constructive advice on how to enhance the reform of the government financing platform company, standardize its financing activities, and provides new thinking for the government department to reinforce the management of the government financing platform company and control the risk of it.Since the author of this paper has long been working on indirect financing, but seldom has working experience on bond financing and stock financing, he is comparatively more familiar with regular financing style, such as bank loan. So in this paper, the author prefers bank credit financing on the selecting of financing strategies, but lacks deep elaboration on the selecting and specific operating of direct financing, which may results in improper or incomplete advice, at which point the author wishes the readers could give precious advice generously for the author to amend and improve it.