Emprical Study On Credit Risk Factors Of Chinese City Investment Bond

City Investment Bond,refers to the bond issued by the financing platforms controlled by local government departments and institutions,and is mainly used in infrastructure construction or public welfare projects.City Investment Bond is generated in the development of China's socialist economy,which is a special financial instrument of local government that has been gradually perfected in the process of urbanization,and plays an important role in China's modernization and the development of the market economy.The issue of the City Investment Bond is a good solution to the problem of the local government's lack of capital in the process of construction.However,with the continuous expansion of the size of City Investment Bond,many problems are gradually exposed.Coupled with the lack of effective regulatory mechanisms,the event of default occurs.For example: several events of default occurred in Chinese bond market since 2016,Shandong Shanshui,Baoding Tianwei,Guangxi Youse,Yabang Group,Yunfeng Group and Zibo Hongda have defaulted,causing widespread concern of regulators and investors.At the same time,the market still generally considers local government would provide implicit guarantee for City Investment Bond issued by government financing platform.However,in 2014 the State Council issued the "opinions" of the State Council on strengthening the management of local government debt ",that required examining the local government debt,government had no responsibility of repaying for City Investment Bond outside the scope,and financing platforms couldn't increase new government debt.Therefore,timely understanding the influencing factors of the credit risk of the City Investment Bond and studying implicit guarantee of government for City Investment Bond in new situation can promote the healthy development of City Investment Bond market on the macro level.On the micro level,it can provide some references for investors to perceive the risk of City Investment Bond rationally,avoid the events of credit default and reduce the investment losses.This paper uses both theoretical research and empirical analysis,to explore the influencing factors of the credit risk of China's City Investment Bond by regarding credit spreads as representative of credit risk,and tries to provide basis for controlling the credit risk of City Investment Bond and grasping the future development of City Investment Bond.Based on multi-linear regression models,we choose the city investment bonds issued from October 2014 to December 2015 as samples,the time after the issue of the "opinions" of the State Council on strengthening the management of local government debt,to analyze how macroeconomic factors,local government factors and factors of financing platforms and bonds itself influence credit spreads.Considering issuers and investors are very concerned about bond ratings in the current market,and in order to study the differences in influencing factors between low-rated and high-rated bonds,we analyze the samples of low-rated and high-rated bonds separately.Low-rated bonds include AA corporate bonds and high-rated bonds include AA+ and AAA corporate bonds,which is different from existing researches.The results of the empirical analysis show that local government factors and macroeconomic factors have more significant impact on the credit spreads than financial factors.Local government financial factors have significant impact on both,but financial factors only affect high-rated bonds.In the analysis,general budget revenue and the administrative levels of platform companies in local government factors have significant impact;ROE in financial factors has impact on high-rated City Investment Bond;growth rate of M2 and the Shanghai bond index in macro factors have significant impact on both.According to the results of theoretical analysis and empirical analysis,this paper draws the following conclusions:(1)the risk awareness of investors in the City Investment Bond market is weak and they overestimate the government's implicit guarantee.(2)Compare to other companies,city investment enterprises are more like financing tools.(3)Credit spreads of low-rated and high-rated City Investment Bond both significantly passively correlate with the growth rate of M2 and the Shanghai bond index.Finally,this paper makes recommendations accordingly,puts forward the deficiency of the research,and forecasts the future directions of research.