The Research On Credit Risk Of China’s City Construction Investment Bonds

Issued by the Shanghai urban construction investment and Development Corporation for a period of two years, urban construction bond in amount of500million in April1993marked the birth of city construction investment bond.City construction investment bond is also called Chinese municipal bond.As a innovation sexual financing means to evade the laws and regulations of local government, it has advantages of flexible financing plans, less external constraints and mitigation financial dilemma of local government by sharing financial spending. Through the issuance or repayment of debt, selecting the direction and scale of investment, city construction investment bond and other fiscal policy effect the expansion or contraction of fiscal policy effect, regulate social demand, optimize the industrial structure, promote regional economic health, and stability developing.City construction investment bond has almost all characteristics of general municipal bond.For example,it has local governments’tax revenue or project benefit as a guarantee and its credit rating after bond’s credit rating and higher than the general corporate bond.So city construction investment bond is safe relatively and considered to be China’s"Silver bond".However,due to lack of relevant laws and regulations,debt and financial information are not transparent, corporate governance structure is not perfect and many other problems,there were a number of city construction investment bond credit turmoil during recently years.On the other hand,city construction investment bond’s issuance is rapid expansion from2009.Compared to2008,city construction investment companies has issued88numbers,156.27billion bonds,a252%increase in number and a279%rose in amount. From2009to2011,city construction investment companies totally issued bonds in486.42billion amount.The phenomenon of credit risk turmoils and extreme growth in city construction investment bond lead many scholars to study on the rational scale and credit risk of it.This article consists of six sections and mainly focuses on credit risk and scale of the city construction investment bond.In the first two parts,it elaborate the concept,characters and present conditions of city construction investment companies and bond.Thirdly,it makes a detailed analysis of the causes and the kinds of credit risks of city construction investment bond.Fourthly,through a comparative analysis of credit risk measurement models,it establishes a improved KMV model to measure credit risks of city construction investment bond.Taking into account of many uncertain factors in the financial markets,article introduces Knight uncertainty factor λ into KMV credit risk measurement model.Different values of λ can reflect the different market emotions of investors. And this will impact the default rates of city construction investment bond.In the fifth part,it sets a example of ZheJiang province to illustrate the applicability of the model.Lastly,for the credit risk of city construction investment bond,article from three perspectives raised some thoughts and countermeasures:scale control, local government debt risk prevention and strengthening supervision on city construction investment bond.