Credit Risk Of China Construction Investment Bonds

After the 2008 financial crisis, China implemented large-scale fiscal stimulus, local governments cooperated with the central government on a large-scale infrastructure construction, but because the revenue of local government cannot meet the rapid growth in spending. Local government financing platform mainly through commercial bank loans, trust planning and investment and debt. Commercial bank loans and trust planning have more and more restrictions. "Budget Law" Article 28 provides that: the local budgets at various levels must in accordance with the principles, making both ends meet, balance of payments, the deficit is not out. As otherwise provided in addition to the laws and the State Council, local governments cannot issue local government bonds." The legal provisions limiting the right of local governments to issue bonds directly.While the central government issuing local government bond not only in quantity is difficult to meet the local government financing needs, but also strict in issuing procedures and requirements. In this context, the city construction investment bonds can bypass the limitations of the central government, began to become an important financing tool, the city construction investment bonds rapidly expanding scale.City investment bonds exist regional differences, the issuance scale of eastern region is large, low interest rates, but in midwest, the scale is small, interest rates is high. The risk of being called a"quasi-municipal bonds," the city vote bonds itself is higher than normal municipal bonds. Beginning in 2010, the city construction investment bonds have been many incidents of a credit event.Foreign scholars research on the series of rules for municipal bonds as well as its credit risk measurement methods, thus provides a strong foundation for us to carry out further analysis. However, the foreign municipal bond is the standard issue, these models are based on the conditions of developed market economy, so the direct use of foreign credit risk measurement models cannot be directly used on the Chinese research.Chinese scholars discussed the feasibility、necessity and risks and methods to resolve of municipal bonds, but the fine quantitative research articles is less. In this article, I choose to research credit risk from the perspective of the city investment bonds, combining theoretical and empirical analysis from the start of the city investment bonds to the present. In order to study the characteristics of credit risk, I look through the development of the city investment bonds, use the improved KMV model to study the credit risk measurement issues of city investment bonds in depth and systematic, combined with the Jiangsu provincial capital investment and debt situation empirical analysis.Finally, after the study of China practical situation and foreign experience in the development of municipal bonds combination, this paper put forward some suggestions on the measures for debt city development.