The Research On Debt Risk Of Local Financing Platform

Where local government financing platform is an important form of raisingfunds for the construction of infrastructure.It has made some contribution for China’surbanization, but inadequate operational mechanism, excessive debt and other issuesalso increased the risk of debt formation, so the problem is related to local financingplatforms need to guard against. Fan Gang, the director of National EconomicResearch Institute recently pointed out that "the original PBOC and CBRC jointlyissued red tape to encourage the establishment of local government financingplatform to borrow money, the debt of local financing platform range from1trillion to7trillion,from the end of2008to2009, raising six-fold."It can be seen from thedata, the development of China’s financing platform beyond the controllable range,we should put more focus on controlling the size of its development.The analysis showed that the biggest debt risk of local financing platform is thatdebt credit of the local government infrastructure and public utilities generated.Local government investment projects are not necessarily a bad project, but it must bea " bad deb similar to financial loans t", because the problem of financing the debtmaturity mismatch risk caused very serious.Simultaneously, the local government commission, financing and capitalmarkets platform between-agent problem is the source of the risk of local financingplatform. Local Government commissioned local financing platform loans fromcommercial banks, while the local government need to issue a " guarantee " as apromise of repayment basis.Projects typically platform company will produce its own cash flow as the firstsource of repayment, but local financing platform investment projects generally havepublic welfare, their gains are relatively small, once the first source of repayment ofprincipal and interest is not sufficient to repay the loan, and then the local government will pay off. Under normal circumstances, the local government debt risk has agreater impact,due to its hidden high, standard and poor,. In order to know whetherthe commercial banks can recover the loan principal and interest within the prescribedperiod, this paper developed a balance sheet of local financing platform and localgovernments to reflect their "family property"，forming a new perspective to studythe content platform risks. The problem is that these things occur in the process ofdevelopment, there are also other problems in the implementation by itself. Manynewly elected officials are involved in the " promotion race ", determining to makea difference during his tenure. so they accelerate the progress of urbanization beyondtheir own capacity in the region. But our government personnel mobility is large, theperiodic changing of the guard system, so that the legacy of " the new governmentdoes not recognize the old account " issue. Many local governments will find ways todelay the repayment of the debt which is left to the next higher level governmentofficials or deal with, so the hidden debt risks occur.According to statistics, a lot of local financing platform companies are relyingon local government land premium payments as a major funding, but " TenCountries" makes the emergence of the real estate market is no longer as usual as theeconomy, which directly affects the price of land. Sharply decline in the price of landdevelopment income also destroyed the capital chain, which is more inspiredpresence debt risk. Moreover, local governments now appear bulls domestic debt,getting status of credit funds from many banks, thus banks, local government hasbrought enormous debt crisis. If you lend money not expected to be settled,it willform a bad debt, the bank’s liquidity of commercial banks will therefore beimplicated.Firstly, we elaborated the basic concept of local financing platform, the so-called"local financing platform" is defined by other local governments and theirdepartments and agencies set up to state resources and assets as collateral by financialgrants or into land, equity and other assets to local way implicit guarantee of thegovernment, the government bears the investment project financing capabilities, and has an independent legal personality of economic entities, and has done acomprehensive overview of its development process and the status quo. Then fromthe perspective of the balance sheet, the local existence the risk of financing platform,debt risk centered to conduct a comprehensive study.In addition to, studying thecauses and influence factors of risk from three aspects: macro, meso and micro werediscussed.Choosing Changchun debt risk financing platform as the empirical analysisobject, which has a certain reference value for other regions.At last for the debt risk, we propose the following recommendations: Thebalance sheet should be included in the budget system of financing platform toimprove the transparency of related party debt; strict control of the establishment andfinancing platform, thoroughly clean credit is poor, the function is unknown, financeunsustainable place financing platform companies; strengthen supervision offinancial institutions, the establishment of a certain constraint mechanism to regulatethe operation and financing platform, which will conduct market financing platform;to strengthen the financing of the construction of the platform itself, to ensure stableoperation. Therefore, the study of local financing platform debt risk issues withtheoretical and practical significance.