Cost-benefit Analysis Of Enterprise In Tianjin Model Town Construction

Since the second half of2005, with the process of urbanization, Tianjin has beendeveloped the model town construction project on the platform of urban and ruralconstruction land increase or decrease. According to the principle of "pilot, graduallyopened", the government has successively organized four groups of construction. Theinvestment and financing companies are borrowers when participating in the modeltown construction project. They applied for a loan from bank to construct, and paidback the loan by selling land, which finally get funds balanced. Therefore, sales of theland play a key role in the capital balance of the investment and financing companies,and influence the future of the model town construction project. At present, the modeltown construction has problem in the unbalanced capital due to large constructionscale and overlapped construction period of several projects. Most academicresearches about the model town construction mainly focus on operating method,construction potential and construction benefit. However, the researches on capital aremainly under the perspective of the government. The investment and financingcompanies are the major participators of the model town construction project;however their cost benefit in the construction project has not been attracted muchattention. That would increase the risk in capital withdrawal and even cause capitallosses for the companies involved in the model town construction project.In this paper, we analyzed the investment income of the companies participatedin the model town construction, and analyzed the commercial housing market andland market with the disequilibrium model and GM (1,1). We also analyzed theexpected land return and the cash flow of the companies involved in the model townconstruction.Our study found that the scale of Tianjin model town construction project islarge. Since2008, the land exchange market usually has fluctuation, and the landrevenue cannot be always promised. At the same time, there is serious oversupply inthe commercial housing market of Tianjin. Also, the financing channel of model townconstruction project is quite single and relies on land sales revenue very badly, whichbrings more risks. As a result, when participating in the project of model townconstruction, investment and financing platform companies have to select proper locations, which have good conditions for the construction, such as mature regionalpriority, in order to ensure land benefit. At the same time it is important to reduce thedependency of model town construction project on the private housing market,optimize the industrial structure and put the farmers’ community, model industrialpark and agricultural industrial zone together. Finally, it is advised to cooperate withthe government to broaden the financing channels, to attract private capital gettinginvolved and use funds from the government, so as to reduce the financing risk.Taking Tianjin Xingcheng Investment and Development Co., ltd as an example,this study analyzed the cash flow of the companies involved in the first and secondphases of model town construction project in Jinnan Balitai of Tianjin.