| Since the implementation of economic reform and open policy, fast and healthy growth of China's economy has been kept steadily. Cities have been playing more important role in social and economic development. Meanwhile, municipal infrastructure cannot meet the needs of economic development and living standard enhancement of people. The main reasons are the insufficient investment in the municipal infrastructure, and traditional finance mechanism cannot meet the demand on investment funds. In order to stabilize the municipal infrastructure finance sources, new financing channels should be developed. Based on the current municipal infrastructure financing status and the introduction of international experience in this area, this paper discusses the necessity and possibility of municipal infrastructure financing through domestic capital market, and the detailed issues of equity and bonds offerings. This paper consists of three chapters.The Chapter One analyses current China's municipal infrastructure development and financing resources. Firstly, the paper introduces the characteristics and functions of municipal infrastructure, and divides them into two categories: profit-making projects and non-profit-making projects. Non-profit-making municipal infrastructure is free to users and financed by the government. Profit-making municipal infrastructure is charged to users, and its proceeds can reimburse its costs and make profits. The paper focuses on the profit-making municipal infrastructure financing through domestic capital market.Secondly, the paper introduces the achievements of China's municipal infrastructure development and existing problems, and analyses the demand on investment funds that comes from rapid development of municipal infrastructure.Thirdly, the paper discusses current status of China's municipal infrastructure finance. The total amount of municipal infrastructure investment funds takes low percentage of total fixed assets investment and GDP, and cannot meet the requirements of social and economic development. The municipal infrastructure financing consists of four sources: government appropriation, bank loans, foreign direct investment and capital market. In recent years, the government appropriation has been decreasing and is approximately at 35%, and other sources have been increasing and now take 65% of total amount. The financing sources have been diversified.Chapter Two discusses the necessity and possibility of municipal infrastructure financing through domestic capital market, and introduces the successful experience of municipal bonds in the US. With the reform of fiscal and taxation system, the transformation of government functions and the rapid development of municipal infrastructure, traditional financing system that heavily based on fiscal investment cannot fit new situation, and market-oriented financing should be increased. Thenew financing system should focus on market-oriented financing with fiscal funds supporting. With the fully promotion and guidance by the government, the profit-making municipal infrastructure should be encouraged to raise funds through domestic market and to reform its operating mechanism. As the government cannot increase its investment to municipal infrastructure, the bank loans and foreign investment have some difficulties in operation; domestic capital market should become more important finance source.Increasing the financing through domestic capital market for municipal infrastructure in China is quite feasible. Profit-making municipal infrastructure projects can produce stable cash flow and incomes, and can be accepted by capital market investors. Profit-making municipal infrastructure operating units can be organized as modern company which is different from traditional state owned enterprise, and be qualified to issue stock and bond. The stable increase of household savings, the rapid development of securities market, and the diversification of financial instruments have formed favorable conditi... |
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