The Researh About Bonds Financing For Urban Infrastructure In China

With the continuous improvement of the level of urbanization in China, thequality and quantity of urban infrastructure needs to be improved. According to thetheory of public goods classification, most of the urban infrastructure and utilities arelocal public goods, the construction and supply of them ask huge demand for funds,the period of revenue recovery of urban infrastructure is long, there is a significantdifference with the construction, and most important there is a strong positiveexternality. There is long history of municipal bonds with mature operation andeffective market abroad, municipal bond is an effective tool for urban infrastructurefinancing, not only effective sharing of debt during the using period, solvinginter-generational unfairness, but also making strong binding with the localgovernments when they intend to invest for capital expenditure through this marketoriented measures.Chapter Ⅰ explains research background and significance, status and ideas andmethods. Chapter Ⅱ focuses on the definition of urban infrastructure and the theoryof municipal bonds. According to the classification theory of infrastructure projects,urban infrastructure is divided into the operating facilities and non-operating facilities,according to the theory of public goods classification, has there are threecharacteristics of urban infrastructure construction, namely natural monopoly, localpublic goods and positive externality. As effective means of financing for theconstruction of urban infrastructure, municipal bonds can be divided into two kinds,one is general obligation bond issued by local governments guaranteed by their creditand specific tax revenue, the other is revenue bonds issued by the agency and theauthority connected with local governments. General obligation bonds providefunds or the public welfare urban infrastructure. Municipal revenue bonds open up aneffective financing channel for operating infrastructure and public facilities.Chapter Ⅲ focuses on analyzing the development status of the bond financingtools of urban infrastructure construction in China. Under the premise that the budgetlaw prohibits local governments to issue bonds, China has formed a portfolio withlending policy of Treasury bond funds, local bonds issued by central government andquasi-municipal bonds in order to satisfy the huge demand for raising capital forurban infrastructure. Capital expenditure by local governments needs to be regulated under the condition that the financial authority and powers of local governments doesnot match. Lending policy of treasury bond funds, local bonds issued by centralgovernment, they are actually strong central government administering, the issued oneand paid one is inconsistent, and due to not include in local deficit, the expectation forthat the central government will pay for the debts is significant, it is against the hardconstraints on the budget of local governments. Quasi-municipal bonds relying oncorporate bonds platform, after years by year accelerated development, there are aexplosive growth in2012, the corporate bonds issued are mainly by local urbaninfrastructure investing and financing corporates. This paper analyzes18cases ofquasi-municipal bonds issued for the construction of urban infrastructure in JiangxiProvince and834cases of quasi-municipal bonds unexpired from2006to2012,summarizes the existing problems of these bond financing methods.Due to huge demand for construction funds in the process of urbanization,limited financial resources, a single structure, the rapid development of the domesticbond market, limited investment channels for investors, a liquidity surplus in thecapital market, Chapter IV of this paper makes the point that issuing municipal bondswhich are suitable for national conditions for the construction of urban infrastructurein China, and effectively guarding against financial risk, market risk, public risk, andfurther promoting the development of the bonds market. Because our centralization ofrevenue-sharing under the current tax system, the financial authority and powers oflocal governments does not match, the financial extractive capacity is limited, localgovernments are similar to the agency of central government, there will be lots ofproblems if we issue municipal bonds operating as in developed countries. Nowadaysissuance of municipal bonds shall be up against the problems of commissioned agent,moral hazard and adverse selection, so we should timely issue the limited creditgeneral obligation bonds, further standardize and regulate quasi-municipal bonds.Based on the corporate credit, supplemented by government credit, standardizedbonds market financing is the development direction of Chinese municipal bonds.Finally, there are big differences between those developed countries, due to thedifference of fiscal and taxation system, historical traditions, financial extractivecapacity of local government and capital market development degree. As arepresentative of decentralized countries, As a representative of centralized country,municipal bonds issued by local government are confronted with strong binding. Thispaper introduces the experience of municipal bonds market in the developed countries,such as United States, Japan, France, the United Kingdom and Germany, explores the arrangements of the laws and regulations, insurance elements, guarantee mechanism,risk prevention system, especially highlights "Treasury company” practicearrangements of Australian Local Government, then summarize common featuresfrom comparing with these model of municipal bonds system in order to provideexperience for the development of Chinese municipal bonds. Using SPSS19.0, basedon the data stream of quasi-municipal bonds unexpired and issued from January2006to December2012, chapter Ⅴ make an empirical analysis of the elements whichimpact on pricing of the bonds, it is found that bonds credit rating, the period apartfrom maturity, the guarantee policy, the slope of the risk-free interest rates, GDPgrowth, the local fiscal and tax revenue gap, Aminvest liquidity indicators aresignificantly impacting the credit spreads. Then try to make the preliminary design ofChinese municipal bonds with clear rules, proposed reasonable release period and sizeand designed the frame of reference of the credit rating and guarantee mechanism.