The Research On Financial Risk Prevention Of City Investment&Construction Corporate In BQ City

In the past ten years,most investment and financing companies run by local governments in our country achieved rapid growth in aspects of assets and liabilities and business scale,although the cause of growth was debts.These platform companies were strictly managed by local governments.Capital was largely invested into projects with low profits and some with no profits.This fact led to a deficient ability of platform companies to sustain their business.Financial risks were becoming increasingly obvious due to problems caused by internal and external environment including immature management mechanism,lack of standardised corporate operation,and large scale of liabilities.In return,risk for local government of not being able to repay debt were increased by problems appeared in platform companies such as insufficient solvency,high level of financial risk and high dependence on governmentally financial support.The aggravation over the crisis from finance risk in platform companies to insolvency risk of local government eventually gained concern from the Central Government of China.The State Department and relevant departments restrained and standardised financing behaviour of local government and finance platform companies through a series of documents.On 1st June 2017,the Ministry of Finance issued a document "Notification from the Ministry of Finance about forcefully Forbidding Violated Financing by Local Government under the Name of Government Procurement of Public Service"(No.87[2017]FB).In this document,the scope of government procurement of public service was strictly defined for the first time through a piece of 'negative list'.This document was considered drastic as government procurement of public service was one of the most common modes applied by platform companies to apply for loans for infrastructure construction.It was extremely urgent for investment and financing platform companies to prevent financial risk under this new condition.This article chose a City Investment&Construction Corporate in BQ city as a research example to have a close look at several measures for preventing financial risk used by practical investment and financing platform companies.Firstly,this article will summarise typical theories on investment and financing platform companies run by government and financial risks.Secondly,this article will introduce business conditions of City Investment&Construction Corporate in BQ city.In this section,this article will extract four main elements leading to financial risks,which are operation risk,funding risk,investment risk and liquidity risk,from a thoroughly quantitative analysis of five dimensions.Lastly,this article will give advice from angles of both the internal and the external.