Government Guarantee Problems Study On Chinese International Projects Financing

Project finance is a kind of investment and finance way that has been generally adopted and accepted by many countries in the world. It is one of the ideal methods to alleviate the problem of insufficient construction capital in our country. Project finance has grown quickly since it was introduced to our country in 1990s. It has produced the enormous impetus to economic development in our country. While one project's success or failure sometimes has close relation with host government's behaviors, project companies have to ask government's guarantee and promise, "In a sovereign guarantee the host government guarantees to the project company that if certain events do or do not occur, the government will compensate the project company. The scope of a sovereign guarantee depends on the unique risk of a project."However at present some problems urgently need to be resolved in project finance or they will become the obstacles of economic development. One of them is sovereign guarantee. Because of lack of legal provisions in this aspect, it has produced some negative effects for the development of the whole economy in our country. Until now the research on sovereign guarantee remains unchanged for many years. It has been ignored about the development and change of the reality. For example, project finance was firstly introduced to power factory project in our country and it is also the most active in this area. However at first government offered too munificent terms to project companies and it resulted that the cost of generating electricity rose fast and could not be controlled. With the implementation of the reform of electric power, the original implementation terms no longer adapt to new condition, so the government have to negotiate with the power plant again in order to revise the previous financing agreement. The effort of absorbing foreign capitals was severely influenced by this action. It caused a new round lack of electricity since last summer.The author attempts to further discuss this problem in this paper from the respect of range, legal nature and legal effect to clarify the contradictory clause of the current law in our country. At the same time, the author wants to point out the correct attitude to sovereign guarantees and discuss how to solve this problem. The author mainly adopts comparing analyzer and real example's research way in this paper. Comparing analyzer is the main research approach throughout the paper. The way of analyzing cases and statistics is used in some chapters.Through introducing and analyzing the conditions of foreign countries, as well as discussing the development trend in sovereign guarantee all over the world, it can be seen that many countries in the world have risen to a new stage for the realization of sovereign guarantee. People began to realize the limitation and defect of sovereign guarantee with realizing its importance. It becomes focus how to make economic and legal environments more perfect in order to substitute and regulate this action. On one hand people hope to reduce the danger that it may bring to national economy and finance, on the other hand they also hope that it could be used more widely. So we must limit the range of sovereign guarantee and strengthen its legal effect and clear its legal nature. Through the research of this paper, the author thinks our government should accelerate to stipulate special legislations on project finance and clearly regulate sovereign guarantee in it. Both its basic principle and the range allowed should be confirmed in it. Its legal nature should be one kind of common behaviors for encouraging and protecting investment. And it should obey international law and domestic law. The law also should clearly regulate the liability of breaching contract and the possible relief way in order to strengthen the legal effect of government guarantee and increase investors' confidences.