Research On China's Local Government Financing Vehicles Exiting The "List System" Management

The local government financing vehicles combines local government's own resources and market forces,and promote China's economic development.After the outbreak of the financial crisis in 2008,the rapid expansion of local government financing vehicles has preserved economic growth but also brought many risks.Subsequently,the central government continued to strengthen supervision.On the one hand,the introduction of a series of policies strictly cut the credit relationship between LGFV and the local government,and clarified the huge debt liability accumulated by the financing vehicles,and also implements a list management for the financing vehicles.On the other hand,some laws and regulations open up new channels for local government to legally finance,such as the new Budget Law that officially give the local government the right to issue debts,and the guidance on the land reserve and toll road special bonds in the first half of 2017.Local governments have new financing channels and the regulations cut the credit relationship between the local government and LGFV.This will speed up the government to clarify the entanglement between them.According to the list of financing vehicles of the China Banking Regulatory Commission,as of the end of 2017,more than 2,000 LGFV companies have withdrawn from the list.However,the exit financing vehicles may realize market-oriented reform and transformation,broaden financing channels,improve corporate governance structure.But they may also face increased risks after losing local government credit and the deterioration of credit status and financial de-leverage,causing their creditors-financial institutions to face debt crisis.This paper takes the local government financing vehicles withdrawing from the "list system" management as the research object.Starting from the exit status of the LGFV companies,this paper select all the vehicles companies that have publicly issued bonds in 2014 as samples,use the binary Probit model to study the list of opt-out vehicles and the factors affecting the government financing function,including company asset debt status,profitability,regional impact and debt ratio.The estimated results acceptance model is generally significant.However,after comparing and analyzing the financial status of the exit LGFV and the LGFV still in the list,it is found that for most exit financing vehicles,the net profit is still highly dependent on government subsidies,and the proportion of public welfare projects is very high.The interdependence with local governments has not changed,and them have not been completely transformed into a fully market-based profit and loss entity.Although the government financing function has been divested,those exit LGFV is still inseparable from the local government's support for all aspects.The list of LGFV management of the China Banking Regulatory Commission is not intended to help the Ministry of Finance control local government financing.Instead,the list system management is used to control the risk of LGFV debts before 2015,when the local governments financing through LGFV is not explicitly prohibited,it is a phased regulatory measure under special circumstances.Therefore,it is more significant to judge the essence of LGFV behavior.In addition to strictly regulating the LGFV financing in the list,it is also necessary to prevent illegal financing outside the list.This paper studies the “list system” management for the local government financing vehicles,which has certain significance for the exit and transformation of LGFV,the prevention of local implicit debt risk management and the transformation of government functions.