The Research In The Operation Of The Financing Platforms For Local Government In Gansu Province

The tax reform in1994made our local government powersdisharmonious, but the local governments in China cann’t stand liabilitiesneither issuing bonds nor loans financing.While facing the huge fundneeds for city development and growing fiscal deficits, the localgovernment had to get around constraints of the law and the system tomake innovation, revitalize the government resources, establish a largenumber of urban construction investment company with the integration ofgovernment background, the collection, financing and investment,construction, management and debt repayment,which was the financingplatform for the local government. The financing platform for localgovernment had become powerful "assistant" for the development ofregional economic of local government, which raised a large amounts ofcapital for the construction of urban infrastructure, eased the financialpressure in the local government and brought the development of thebanking business. It played a positive role in accelerating the urbanizationconstruction,narrowing the gap of urban and rural, pulling folk capital.At the same time, the financing platform appeared some concernedproblems that should be paied high attention. Followed by nonstandardthe specific performance in the operation and excessive platformliabilities, unsound reimbursement mechanism, imperfect risk constraintmechanism imperfect,etc. This article chooses Gansu province as the researchobject,analysising the necessity of establishing the financing platform forlocal government in Gansu province.Using the qualitative andquantitative methods to analysis Gansu’ financing platform for the localgovernment, including the sources of capital, financing channels, capitalinvestment, repayment sources and characteristics in order to have acomprehensive and systematic understanding of the current developmentof Gansu’ financing platform.for the local government.Taking LanzhouCity Development Investment Co., Ltd. as a typical example to researchits corporate governance structure、subordinate units and their respectivebusiness scope、 mode of operation、 operation effect and financialsituation in the hope to reflect the whole by understanding the point andto know more about how the financing platform works on earth.Focus onthe problems the financing platforms exist.finding out that the mainproblems are as follows:the financing platform is set up non-standard、capital is inadequate、guarantees lack of legal protection、the platformfinancing channels is single、over-reliance on bank loans、excessive debtin financing platform、lack of ability to repay、lack of appropriate riskconstraint mechanism.To solve these problems, the paper take carefulstudy of the excellent local government financing experience in UnitedStates and Britain,and discuss city investment company’developmentcharacteristics in Shanghai and Chongqing,and find out some experience worthy Gansu Province to reference:The local governments should bepositioned reasonably and accuratly,and play the role of guiding socialcapital by the limited financial resources.The local governments functionsshould be separated from enterprise management.The local governmentsshould pay attention to the role of private capital to build a diversifiedinvestment and financing channels.The local governments should attachimportance to create a good legal environment. This paper argues that thereasons why the local government financing platform of Gansu provinceexist so many problems, not only relates to the platform itself, but alsohave a close relationship with the government and banks.The paper putsforward policy recommendations to promote healthy and sustainabledevelopment in Gansu’ financing platform for local government from theview of financing platform itself, the government (including central andlocal governments), and the bank’s respectivly.The Platform companiesshould regulate their own development by strengthening their companybehavior and fading the administrative color.The Platform companiesshould enhance risk awareness and establish mechanism controliinginternal risk.The Platform companies should explore actively to build adiversified financing systemby widening the channel of corporate finance,such as exploring the establishment of the equity industry fund, andtaking full advantages of the insurance funds.The Platform companiesshould emphasis on the training of professionals and give play to talents. The Local governments should be clear about their own functions,and actaccordingly to their financial resources.Strengthening local governmentfinancial,the central government should distribute more transfer paymentto Gansu province.The Local government also should establish localgovernment debt management system to make their debt undercontrol.The bank should enhance the loans management on the financingplatform.To make sure choose qualified platforms and projects.Toreinforce the "syndicated loan" and supervise the platforms after theloans.