The Financial Crisis Under The Local Government Financing Platform Loans Growth Problem Research

Under the influence of the global financial crisis triggered by the U.S. subprime mortgage crisis, China faces risk of economic downturn brought by external demand shrinking:overcapacity in some industries, enterprise troubled in production and management, urban unemployed persons increased, downward pressure on economic growth, etc. In response to the financial crisis, the government has put forth a series of policies and measures to expand domestic demand and increase economic growth, laying a solid foundation for the realization of economic development targets. Meanwhile, commercial banks have been cooperating closely with local governments, commercial banks invested a large amount of the credit for all categories of local government financing platform, which are for infrastructure building.In this economic context, this thesis reveals the current situation of the local government financing platform bank loans in China, focuses on analysing the reasons and hazards of commercial banks’extraordinary expansion of credit, then gives countermeasures to commercial banks to accurately grasp the current credit and effectively prevent credit risks.This thesis contains six chapters. The first chapter is introduction of the background and significance, main content, framework and innovations of research in the thesis.The second chapter is the related theoretical basis of local government financing platform, it introduces the concept, the main financing method and the causes of local government financing platform.The third chapter analyzes the current situation and the reason of local government financing platform bank loans in China, points out that the number of local government financing platform and local government financing platform bank loans have shownd rapid growth during the first half year of 2009.The fourth chapter analyzes the hazards of a substantial increase in local government financing platform bank loans, points out that only government investment will not be conducive to healthy economic development and may lead to a bubble of infrastructure construction, while the infinite proliferation of local government credit will weaken the solvency of local government, increase bank credit risk and may generate a new round of non-performing loans.The fifth chapter gives the countermeasures from the view of commercial banks, points out that commercial banks should improve the credit risk system, such as methods to evaluate credit, governance structure and credit management of local government financing platform.The sixth chapter is the summary of this thesis.