XX Local Government Debt Risk Financing Platform For The Company's Control

Local Government Financing Platform Corporation (Hereinafter referred to as LGFPC), established by the local governments at all levels through fiscal appropriation or asset injection such as land property, stock rights, is an official investment management corporation that has the qualification of an independent enterprise legal person. LGFPC bears the function of financing and investment. Through LGFPC, the local government could apply construction loans from bank to invest the welfare project and some key construction project that related to the people’s livelihood.In recent years, the local governments, through the investment and financing of LGFPC, play a positive role in infrastructure construction, promoting the local economic and improving the region’s GDP. However, some of LGFPC, owing to the expansion of debt financing, low utilization efficiency and bad management, have to face the problems of high debt ratio, insufficient debt paying ability and bad state of business. As the reimbursement deadline approaching, few years later the debt financing is bound to become a great financial burden to the local finance. In order to make LGFPC circumvent the risk of debt from the management level, improve the management performance, this thesis stress on the development path of LGFPC and debt risks faced by the companies in the process of operation. Based on my own working experience, guided by the theory of corporate governance and financial risk management, this thesis takes an actual financing situation of XX financing Platform Company as the background, revealing the looming serious situation of the debt risk. What’s more, it also discussed whether this non-market operating company could make good use of market-oriented operation management mechanism to avoid the potential risk and execute the real solution, such as consummating corporate governance structure, expanding financing channels, increasing cash flow, and establishing the risk management mechanism. These management mechanism and solution could perfect the corporate governance structure of the company so as to make it effective internal control mechanism in company, which avoids the risk from the local government department leadership operating the company with personal willpower to a certain extent. By which the LGFPC would be expected to avoid risks through the rational use of the law of the market economy, such financing platform companies would gradually embark on the track of the market-oriented operation, and the sustainable management and development of such financing platform companies would be maintained.