Reflection On The Boom Of Local Government Financing Platform

Since 90s,20th century, along with China's rapid economic development and the acceleration of urbanization advancement,some local government financing platform have appeared,for breaking through the bottleneck of Infrastructure construction financing and law barriers that the State prohibits local government financing. Especially from the 4th quarter of 2008, for meeting the international financial turmoil, local government financing platforms have increased in a"rolling snowball"fashion.When preventing the economy slowing down too quickly, It also led to a high degree of attention and concern of all parties ,for it could precipitate debt risks and associated fiscal and financial risks. This article first completely and systematically elaborates the overall operation of the financing platform, including the definition of the financing platform, characteristics and types, the reasons and background for the rapid development,the establishment and operation, sources of capital,patterns of project financing, fund utilization and the source of repayment,so it responses to the question that"the financing platform is what" in detail. Based on this, we reveal problems in operation and risks that may arise: from the perspective of national economic development, structural problems and systemic risks further increase, exacerbating the imbalance between investment and consumption, affecting the inefficiency of financial resources,increasing the systemic financial risk; from the perspective of the practical subject of loan, local finance accumulates recessive risk, having intensified the investment impulse of local government, overdrawing the next financial power and being difficult to control the scale of local government debt; From the perspective of the subject of lending, credit risk management of commercial banks is still difficult, the legal risks of government guarantees still exist , the risk of information asymmetry between goverments and banks is difficult to remove, the disorderly competition among banks complicates management; from the perspective of local governments and their financing platforms, there are also problems that should not be neglected; From the perspective of the regulatory subject, relatively relaxed policy environment will weaken the effect of macro-control policy. By analysis of a large number of cases and data, using the basic principles of public economics, from the perspective of strengthening risk management ,debt management and credit management, on how to regulate the operations of local government financing platform and local government borrowing behavior, prevent and resolve systemic risk that may arise, putting forward directional and maneuverable recommendations.Firstly,With the change and development of economic situation, to gradually prevent or defuse risks that the local government financing platform may arise.Secondly, to rationally determine the local infrastructure construction plan and to provide a clear debt guarantee.Thirdly, to actively strengthen the credit management for financial platform, to speed up the strengthening for credit risk prevention mechanism. Fourthly,to clearly define the responsibility of local governments and business platform ,to promote the standardized operation of local government financing platform.fifthly, to promote scientific management of government debt, steadily expanding the scale of local bond issuance.Finally,to establish and improve debt risk monitoring system ,to prevent the irregular financing behavior of local government. The six policy proposals form a integrated system solution. It is full of great theoretical and practical significance, for the promotion of investment and financing systems, improving the financial system and debt management system, further transforming government functions and making the government decision-making more scientific, democratic and legal.