Research On The Transformation Of Local Investment And Financing Platform

In recent years, China’s economy enters to a new phase:to deal simultaneously with the slowdown in economic growth, making difficult structural adjustments, and a bsorbing the effects of the previous economic stimulus policies. A lot of deep-seated problems, which were covered by high growth rate of economic in past decades, begin to show more critical influence and get much more attention by the central government. Among these problems, a huge amount of local debt and transition of thousands of local investment and financing platforms are undoubtedly the most far-reaching and pressing issues. Effectively resolve the debt risk has become the key point to the question that whether China’s economy can achieve a soft landing. Local investment and financing platform is the product of the local government’s innovation in investment and financing, it plays an important role in speeding up the urbanization construction and promoting economic growth. Because of several reasons, such as the combination of enterprise credit and government credit, the lack of market decision-making process, enterprise management mechanism is not perfect, the local investment and financing platform, as the main bearer of local debt, is facing a serious challenge. High debt development model is no longer adapted to the current macroeconomic situation, the action of enterprise transition and debt deleveraging is starting to kick off.Firstly, this paper makes an investigation on the background and current situation of the local investment and financing platform, and describes the origin, development and function of the local investment and financing platform. The transition of local investment and financing platform is the focus of this paper. Secondly, after analyzing the principles and transition direction of the central government to deal with the platform, this paper puts forward the countermeasures to be taken under the current situation for local governments and platforms. In the current economic and policy environment, the key to the successful transition of local investment and financing platform is enterprise reform and debt deleveraging. Correspondently, this paper puts forward some concrete measures, such as separating the functions of the government from those of the enterprise, restructuring assets and debt, asset sale, asset backed securitization, etc. This paper also tries to design a classification method of assets, which is based on ROA and the relativity between assets and enterprise strategy. This paper also suggests that the local government can set up a professional asset management platform to co-ordinate the disposal of assets, and to improve the efficiency of debt deleveraging. To prove the point of view, this paper also takes S company in S city as an example, by analyzing the reform measures and future plans of the case company.