Some Suggestions on Regulating Local Government Investment and Financing Platforms In March 2009, the People's Bank of China and the China Banking Regulatory Commission jointly issued the "Guiding Opinions on Further Strengthening the Adjustment of Credit Structure to Promote the Stable and Rapid Development of the National Economy" , proposed to “support qualified local governments to establish investment and financing platforms, issue corporate bonds, medium-term notes and other financing instruments, and expand supporting financing channels for central government investment projects.” To this end, some local governments drew on successful experiences from other places, reformed the original local government financing platforms, and began to build new model investment and financing platforms, which expanded huge financing space during the operation. 1. Operation of the new local government investment and financing platform (1) Starting point for the construction of the new platform. The purpose of local governments building new financing platforms is to seize this once-in-a-lifetime development opportunity, give full play to the guiding role of state-owned capital in the allocation of market resources, activate the capital attributes of government resources, revitalize existing state-owned assets, and achieve diversification of investment entities and financing Diversification of channels, scientific investment decision-making, standardization of investment management, and marketization of operations. Establish an investment and financing system with sound systems and standardized operations and a virtuous cycle mechanism that integrates financing, investment, construction, management, and debt repayment to realize investment and financing from Each department is responsible for the transition to centralized leadership by the government, the transition from administrative decision-making to market choice, the transition from government debt to capital operation, the transition from indirect financing to direct financing, and the transition from free investment to paid returns. (2) Main functions of the new platform. The first is a unified government financing platform. The new investment and financing platform integrates high-quality government resources, uses market-oriented means, and raises funds for the government through multiple channels to implement supporting funds for major projects, supplement infrastructure construction funds, and realize the government's investment guidance intentions. The second is a market-oriented state-owned assets management platform. As a management platform for state-owned companies and state-owned assets, the new investment and financing platform uses market-oriented means to integrate and adjust subsidiaries and allocated operating assets, promote the reform and reorganization of state-owned enterprises, realize the orderly advancement and retreat of state-owned capital, and promote high-quality assets to advantages Enterprises are concentrated, concentrated towards the high end of the value chain, and extended to key links in the industrial chain to achieve the goals of adjusting the layout of state-owned assets and optimizing the industrial structure. The third is a policy-based industrial investment platform. As the government's industrial investment platform, the new investment and financing platform invests on behalf of the government and conducts industrial investments in accordance with local industrial policies. On the one hand, it can expand sources of investment funds and successfully realize policy intentions; on the other hand, it adopts market-oriented operations and management, which is conducive to improving investment efficiency. The fourth is a leading entrepreneurial guidance platform. As the government's leading entrepreneurial guidance platform, the new investment and financing platform will give full play to the role of government funds as seed capital, guide strategic investors to participate in major project construction with state-owned capital's early investment, and better utilize market-oriented means such as equity and funds to cooperate with other institutions. Carry out financial cooperation, provide capital management services, cultivate and coach the growth of entrepreneurial enterprises, and develop a number of new projects and new enterprises that are highly related to regional core industries, have broad market prospects, good economic benefits, and high technological content. 2. Evaluation of the effects of new local government investment and financing platforms As an important platform for local governments to strengthen macro-control capabilities, rationally allocate resources, and promote economic structural adjustment, new investment and financing platforms can fully exert the policy effects and inducements of local government investment and financing. It has played a positive role in promoting economic growth and economic structural adjustment. But at the same time, because these platform companies have been under a soft constraint mechanism since their establishment and their financial information is not transparent, as the scale of debt continues to expand and the debt repayment peak period approaches, their debt risks are worrying. (1) Government financing faces real legal risks. At present, there are two main guarantee models for new platform project loans: one is the financial commitment model of government commitment and financial backing, with "bundled loans" being the most representative. From the perspective of legal regulations, the financial commitment method of "bundled loans" is essentially a special "guarantee guarantee." my country's "Guarantee Law" stipulates that "state agencies are not allowed to serve as guarantors, except for the use of foreign governments or foreign governments approved by the State Council. "Except for on-lending loans from international economic organizations", it is obvious that "bundled loans" do not fall within the scope of state agencies that can become guarantors. Its repayment in the form of financial commitments is suspected of violating the mandatory provisions of the law, and it is difficult for banks to Take the agreement to court and file a lawsuit. The second is the rights mortgage guarantee model, of which “pledge of land transfer income rights” is the main method. Although the land transfer income rights to be pledged by the platform company can be considered as a kind of creditor's rights, which are property and transferable, they are not certain. That is to say, the subject of the pledge is not specific and is only a future possibility. The creditor's rights in the future will also be formed in batches, which does not comply with the provisions of the Guarantee Law on the certainty of the subject matter of the guarantee. Once the pledge target is missing and the platform company cannot repay on time, there will be a "vacuum" of guarantees for bank loans, and it will not be able to apply for court enforcement to ensure the recovery of the loan. (2) The legacy debts of the original platform companies may become “unsolved cases.”

Since the new financing platform was not only established on the basis of the reorganization of the original platform, but also the existing state-owned assets of all administrative institutions were liquidated and bundled, and merged into the platform company as collateral for refinancing from banks, This reshuffling of the asset portfolio has made the old accounts of bank loans that have not yet been repaid, using these platform companies and administrative institutions as borrowers and their assets as collateral, become even more confusing. Moreover, the bank did not know about such an operation. Therefore, in a sense, the government is eager to establish a new financing platform and does not rule out the suspicion that it wants to get rid of historical debts to a certain extent. (3) The accumulation of bank credit risks due to the lack of overall control over the scale of liabilities. The starting point for local governments to establish new financing platforms is to expand the financing capabilities of platform companies and raise as much investment funds as possible for the construction of infrastructure and key projects. At present, financing channels mainly rely on bank loans, and banks also favor government projects. , often platform companies dare to borrow as long as banks are willing to lend, and local governments even introduce some incentive policies to actively encourage banks to increase credit investment in platform companies. As an investment investor, the overall liability scale of platform companies is controlled at At what level, the local government has not made systematic and comprehensive arrangements. On the other hand, the current financing situation of local investment and financing platforms is very opaque. The capital, use of credit funds, overall liability status and repayment capabilities of local governments and their financing platforms are not completely clear. Banks are in a relatively weak position, which puts banks in a relatively weak position. It is difficult for banks to implement effective risk monitoring on credit funds flowing into platform companies. (4) The government’s long-term debt repayment mechanism and the platform company’s market exit mechanism are missing. The term of the current government is five years, and the financing loans that government-backed platform companies obtain from banks are all medium- and long-term loans, with terms of more than three years. The pressure to repay the principal and interest on these loans is often not up to the current government. To establish a long-term and effective debt repayment mechanism, the current government lacks motivation because there is no pressure. Without the constraints of statutory government debt limits, financial commitment-style repayment responsibilities are standard "soft constraints" for local governments. ". In addition, after these platform companies complete their historical mission of investment and financing or when they encounter operational difficulties, local governments rarely consider how to dispose of loan mortgage collateral and how to fulfill their commitments to bank claims in the long term and establish corresponding market exit mechanisms. 3. Suggestions for further standardizing new local government investment and financing platforms (1) Deepen the reform of the local government investment and financing system. Judging from the current situation of local government investment and financing, the primary task is to further reform the investment and financing system, cultivate government investment entities, improve the corporate governance structure, and truly establish a social investment growth mechanism of "government guidance, social participation, and market operation", and use multiple A new financing method to achieve diversification of investment entities, multiple sources of funds, diversification of investment methods, and marketization of project construction. The second step is to improve investment and financing policies and strictly define the scope of government investment so that government investment is mainly used in economic and social fields where the market cannot effectively allocate resources and projects that have a significant impact on the overall local economic and social development; improve scientific decision-making procedures and establish government investment decision-making Consultation and evaluation system to achieve scientific, democratic and legalization of government investment management. Third, strengthen investment supervision and management, establish an accountability system and a power check and balance mechanism, strengthen project tracking and coordination management, and improve the audit system. (2) Establish a scientific, reasonable and efficient debt management model. It is necessary to establish a scientific, standardized, reasonable and practical debt management model that "has a certain amount of debt, has a certain amount of total debt, uses debt wisely, has money to repay debt, manages debt in a regulated manner, and borrows debt responsibly". The first is to issue local government bonds appropriately, with superior governments and intermediaries conducting scientific assessments of local government borrowing capabilities and providing corresponding credit guarantees to control government debt within the range that local financial resources can bear. The second is to strictly control bank lending activities. Bank financing activities can be limited to short-term and medium-term land mortgage loans for the purpose of effectively reserving land for construction, and reduce non-disposable state-owned asset mortgage loans. The third is to legislate to establish a long-term debt repayment mechanism. It is necessary to bring government debt construction projects, investment scale, principal and interest repayment and other plans into budget control, establish government debt sinking funds and debt risk early warning mechanisms, and also adhere to the principles of "whoever borrows, who repays, who benefits" and "whoever approves, guarantees". Based on the principle of "who is responsible", establish a debt repayment mechanism that unifies borrowing and repayment and combines responsibilities and rights, strictly determines the debt repayment unit, and ensures the source of debt repayment funds. (3) Properly handle the remaining issues of government project loans. From the perspective of establishing a new credit image of new local government financing platforms, we must effectively deal with the problem of the original platform companies' default on bank loans, and build "borrowing new accounts" on the basis of "repaying old accounts." The first is to comprehensively clean up government debt. Actively carry out the work of sorting out government debts, comprehensively verify the creditor-debt relationship, time, amount and purpose, term, interest rate, repayment status, etc., re-confirm the creditor-debt relationship, and identify the creditor-debtor entities. The second is to clarify relevant policies for the disposal of old debts. Dispose of old debts based on the principles of "who borrows the debt, who is responsible" and "whoever benefits, repays". The third is to arrange special fiscal funds for loan repayment, formulate a repayment plan for the principal and interest of the remaining problematic loans, and gradually repay the principal and interest of the non-performing loans. The fourth is to improve relevant loan procedures, ensure that mortgages and guarantees are legal and effective, effectively protect bank claims, and enhance the confidence of financial institutions in credit investment. (4) Actively explore and try various direct financing methods.

It is necessary to steadily promote the diversification of financing methods for government investment projects and effectively alleviate the pressure on bank credit. Including issuing bond financing, such as municipal bonds, corporate bonds, etc.; trying asset securitization financing, guiding state-owned high-quality assets to achieve direct financing through listing, supporting financing platform companies to hold shares and joint stock companies to go public, and improving the direct financing capabilities of financing platform companies; promoting municipal Industrialization of public utilities, effectively stripping away urban public utility ownership, operation rights and maintenance management, attracting various social funds to directly invest in construction and operation; promoting project financing, for some large infrastructure projects, such as bridges, water plants, sewage treatment Factories, etc., can adopt BOT, TOT, PPP and other methods to raise construction funds. (5) Banks should actively grasp the financial information of platform companies and effectively monitor credit risks. Banks can neither lower existing strict loan review standards because lending to government financing platforms can increase bank operating profits, nor can they be deterred by fear of risks. It is necessary to fully participate in the project review in view of the diversity and particularity of the loan subjects and guarantee methods of the government financing platform project loan model, conduct an in-depth theoretical analysis of various loan methods under the existing legal framework, and effectively avoid loan risk. At the same time, the platform company is required to set up a pledge guarantee for the loan in the fund withdrawal account or income account to ensure that the funds under the account have priority for repayment; secondly, it is necessary to establish a bank supervision account to ensure that the loan funds can be "dedicated for specific purposes". " to prevent them from being used for other purposes; thirdly, we should try to gradually establish a complete risk assessment system for government-backed loans, strengthen the analysis and prediction of local economic development, and conduct analysis on changes in future cash flows of loan projects that have been issued. Follow up and evaluate, implement full tracking and strict monitoring of loan use, and take necessary credit sanctions against platform companies that misappropriate loans.