The Study On Risks And Countermeasures Of The Local Government Financing Platform

In recent years, the local governments all over China are improving the construction of infrastructure and the construction of public welfare undertakings energetically with the support of the central policy. In order to solve the problem of construction fund shortage, most of the local governments depend on financing platforms for investment and financing. According to the survey, there are3,800financing platforms of the local governments in China, and the assets are nearly9,000billion.yuan.Undoubtedly, under the condition of financial fund shortage, the financing platform has played an active role in the development of the regional economy. But, with the large number of bank loans flowing into the financing platforms and the rapid increasing of investment projects, the risks that financing platforms are faced with appear by degrees. Relevant departments and experts are paying more and more attention to this problem, and they discuss it extensively. Taking this as the background, this article focuses on the risk of the financing platform, the reason and the targeted solutions. It aims at giving some feasible suggestions to prevent the financing platform from risk.Firstly, the author explains the conception, classification and operation mode of financing platform. It lays a theoretical basis for the following discussion. Secondly, the author points out the risks of the financing platform against the background of national macro-control. Such as risk of policy and compliance, risk of paying back loan by single financing mode, financial risk by the local government guarantee, credit risk by irrational expansion of loans, and moral risk. Thirdly, the article analyses the internal and external causes of risks. The causes include the interaction of local finance limited and investment impulsed by political achievement, the lack of control mechanisms, the indeterminacy between powers and responsibilities, the chaos of executive power, the absence of laws and regulations, and the stimulation of quantitative easing. Fourthly, the author puts forward solutions to the problems from policy laws and regulations, the rule of market economy, self-discipline and financial order. Including strengthen internal management of the local governments and financing platforms, establish early warning mechanism, debt repayment mechanism, risk control mechanism etc. At last, the author answers how to develop the financing platform healthily by giving an example of Chengdu G Company.Based on the former research findings, the article breaks the boundaries of macroeconomic research and microscopic research, also the boundaries of theoretical research and empirical research according to the theory of Public Economics. And the author integrates macroeconomic research with microscopic research, theoretical research with empirical research, qualitative analysis with quantitative analysis, in order to make the research ideas clearly. This article not only focuses on financial system, but also focuses on the relationships of the local government, bank, regulatory authority and financing platform, trying to put forward the countermeasures systematically.