Research On The Risks & The Reform Of The Local Government Financing Platform

Content China is in a critical period of urbanization construction,coupled with the impact of the global financial crisis caused by the Asian f inancial crisis of 1997 and the us subprim e mortgage crisis of 2008,Chinese central government continues to im plement the expansionary fiscal and monetary policies,implement a large-scale infrastructure investment,which leads to the local governm ent has an enormous supporting the funding gap.Therefore,local governments adopt the way of debt to stimulate the economy development actively,and use of the financing platform company for financing to m ake up for local fiscal gap,regardless the debt limit of the original "budget law".The esta blishment and development of local government financing platform has the distinct characteristics of The Times,with the positive results had been achieved.However,But it also accumulated many problems and risks in operation due to its inherent flexibility and irregularity.Local government financing platform is an important part of the fina ncing system of Chinese governm ent.If local government financing platforms’ fractures of cash flow or other risks was appeared,the local fiscal sustainabilityand economic development would also be af fectednegatively because of its conductivity and diffusivityin financial and economic system.Although the risk indicators of China’ s local government debt were in the range of general standard reference,the overall risk was contro llable,but China had already started to plan ahead in the national level,started from the perspective of long-term analysis and studied some hidden dangers and risks in local govern ment financing platforms.In recent years,the central government issued many documents about local government financing platforms which guide the reform of the local government financing platforms.From the documents,local government financing platforms are not al lowed and the financing platform s’ debt was separated from local governments’ debt obligations,the central government encouraged local governments in the field of public service using PPP(public-private partnership)model,however,the result is not good.Now,PPP is becoming another form of local government financing platform because of the non-standard utilization.The reform of local governm ent financing is imminent,which is not only the necessary measures to guard against and defuse financial risks,but also the protection of the econom ic security﹠social stability to study.In this background,the paper,which based on the theory of national policy,market enhancing view,government finance,risk management,researches the local financing platform s’ problems and risks and a variety of reasons system atically.In combination with som e international govern ment financing mode and experience of developed countries and the guidance of national policy and the new problems after 2014,the paper carefully proposes some reform direction of the local government financing platforms.Following are the main points: Separation of government and enterprises,classification positioning,transforming to materialization;Fair competition,survivalofthefittest,transforming to the market-oriented.Meanwhile,the paper carefully proposes some reform Specific measures of the local government financing platforms: corporatization reform;optimize the capital structure;optimize equity structure;appropriate credit,etc.At the sam e time,the reform needs some external support,such as define the scope of public welfare projects and Quasi co mmonweal projects accurately;improve the relevant legal system;reform the fiscal and taxation system to strengthen the financial base of local government;construction of supervision system of the local government investment and financing;Regulation the behavior of co mmercial Banks and other financial institutions;Specification PPP operation mode.