Chinese Version Of The Quasi-municipal Debt

The first urban construction bond (UCB) was issued by the Shanghai Urban Construction Investment and Development Corporation in1993, which unveiled the veil of UCBs. After just two decades’ hard development, the UCBs have finally embarked on the stage of history and aroused great interests of government, enterprises, investors and normal people. It not only made indelible contribution to the fight against the global financial crisis, but also made huge contribution to rich bond products, expand the market depth and improve the entire bond financing. However, the explosive growth of the UCBs market also brought tough issues in the past two years, such as unreliable financial data, government’ implicit or explicit guarantees, different aptitude urban construction corporations and occasional UCBs credit crisis disrupted the capital market and participants involved. The attention of the credit spread of UCBs grew fast, as a product of transitional period of municipal bonds. The characteristics of municipal bonds have been more obvious. Therefore, the study of Chinese version of quasi-municipal bonds credit spread determinants is of great significance.As one of the relative new variety of bonds, UCBs are seldom researched by domestic scholars, especially in the field of empirical analysis. Most journals are limited to development, suggestion of UCBs and simple empirical analysis with cross-section data. While in this paper, we use multiple linear regression models with panel data after serious consideration of actual situation of UCBs market. The data range from the third quarter of2010to the first quarter of2012and they are divided to financial indicators as well as macro indicators. The expectation before the empirical analysis is that UCBs have obvious characteristics of municipal bonds, which means financial indicators for the interpretation of the UCBs’credit spreads is not significant.After carefully analyzing1099data of157UCBs, we get the following empirical results:financial indicators, including asset-liability ratio, current ratio, interest coverage ratio and net assets for the interpretation of UCBs’credit spreads is not significant and the sign of the coefficient is instable. While the LOG of PER GDP, infrastructure stocks and the budget deficit rate and other macro indicators for the interpretation is highly significant. According to the American scholars’ theoretical research and practical experience, the determinants of credit spreads in municipal bonds are largely determined by the local government of GDP, local government finance, balance of payments and the basis of interest rates and other macroeconomic indicators.In this paper, we do the empirical analysis from panel data angle and get important conclusions both in theory and practice. First, theoretically proved that UCBs are indeed the Chinese version of quasi-municipal bonds, because of its dual properties of municipal bonds and ordinary corporate bonds, here known as quasi-municipal bonds; Second, from the practice that the government should make efforts to implement financial and tax regulatory game laws and regulations of the improvement and reform of central and local government to make UCBs become true municipal bonds in the near future.