| Within recent years, the rapid growth of the Chinese economy has caused China to be more influential. China’s aggregate economy is constantly growing, with its international ranking rising continuously, from sixth place in 2006 to second place in 2011. In the nexus that stimulates the economic development, including investment, consumption and foreign trade, it is investment that plays a pivotal role. To speed up the process of urbanization, the scale of investment in urban infrastructure is constantly growing in various cities. Governmental financing platforms, such as urban investment companies, are springing up all over the country. Since the financial crisis in 2008, investment in infrastructure has also become an important means for stimulating domestic demand and promoting China’s economic development. During this process, these urban investment companies play indispensable roles.However, while the investment-driven economy has brought about rapid expansion of the financial scale of urban investment companies, the potential for huge debt risk is high. This has attracted great attention from both the state and society. In 2010, the state gradually carried out a series of programs for the clarification and standardization of financial platforms and prevention and control of financial risks. During this process, numerous urban investment companies suffered from a number of potential risks caused by development orientation defects and long-term illogical development, as well as survival and development dilemmas as insolvency and capital chain ruptured. It has now become imminent to make the fundamental transition to market-oriented development.One local urban investment company, Changshu Urban Management & Investment Co., Ltd. (hereinafter referred to as Changshu Urban Investment), has played a positive role in advancing the economic construction development and promoting urbanization of Changshu. However, due to adjustments in national policy and constant changes of the macro economy, the company still faces the same predicament as other urban investment companies. Great hidden risks have accumulated during the process of long-term planned-economy operation and management. Therefore, rational analysis and in-depth study are needed.First, the enterprise, with its government background, lacks decision-making autonomy. All the construction projects undertaken by the company are decided by the government. The company is mainly responsible for the construction organization, process management and transfer upon completion. All the key work of Changshu Urban Investment, such as "investment and financing, construction and management," is under the instruction, management and supervision of governmental administrative departments. Although this practice has brought down the liabilities and risks of the company, this work should not be undertaken by non-market agencies. There is no clear line between the functions of the government and business enterprises.Second, due to the aforementioned special nature of the enterprise, the company mainly relies on bank loans for financing the undertaken projects. Changshu Urban Investment gets financed for the purpose of helping the government to complete construction tasks. But this is not the company’s initiative action. Meanwhile, the company’s financing channels have not been fully expanded. Financing plans are dominated by the government, resulting in a very low rate of fund utilization. Changshu Urban Investment has been given a large number of public infrastructure projects; due to the huge fund demand of these projects, the company often suffers from great financial pressure. Debt and cash flow risk are greatly increased.In light of the preceding challenges, it has become imperative to study:the exploration of market-oriented management by Changshu Urban Investment; the further optimization and improvement of the quality of asset structure; the promotion of transitional development; and the increase in the market-oriented operating mechanism of the company on the basis of investment, financing, management and construction roles. The author will carry out analysis and study on the subject of market-oriented development of Changshu Urban Investment in the following sections.In the first section, the current situation of Changshu Urban Investment and the successful experience with market-oriented operation are discussed. The author summarizes the current situation of the urban investment company and summarizes the characteristics of general development mode and market-oriented development mode. Through comparative analysis, it’s concluded that market-oriented development is a feasible solution for breaking the predicament currently faced by the urban investment company.In the second section, analysis is made for the necessity of market-oriented development of Changshu Urban Investment. From a brief introduction of the basic situation of Changshu Urban Investment, various internal risks are further analyzed. The predicament faced by the company is analyzed from the perspectives of company background and development positioning. It’s essential for Changshu Urban Investment to explore the implementation of market-oriented development so as to avoid various risks, define development orientation and discover a healthy development path which complements the characteristics of Changshu.In the third section, the fundamental solution to the problem is proposed-Market-Oriented Operation. Through the SWOT analysis for Changshu Urban Investment, a market-oriented development plan is preliminarily developed, based on the company’s strengths and weaknesses. Based on the successful operating experiences of both China and abroad, market-oriented development strategy is brought forward from four aspects:operating mode, financing mode, investment and management and internal control mechanisms for the purpose of gradually realizing the market-oriented operation of the company. |
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