Initially Search On Financial Risk Management Of Local Government Financing Platform

In recent years,a series of the implementation of state key construction projects and the urban construction projects increase the financial crisis of the local government.The number of local government financing platform has grown dramatically in the favorable financing environment.Governments at all levels rely on local government financing platforms for financing and construction,which has made a great contribution to local economic and social development.Because of a lot of problems such as the overwhelming momentum、the rapid debt expansion,etc,local government financing platforms did not only bring a great deal of financial risk for itself,but also cause damage to the healthy development of national economy.If the enterprise can not identify and cope with the financial risk in time,then the financial risk will be upgraded to a financial crisis.Due to the special properties of the local government financing platform companies,the financial risk of the enterprise will very likely to cause a financial collapse of local government.Therefore,the disscussion on the problems of how to control local government financing platform companys’ financial risk has practical significance.The main research method in this article is literature research method and case study method,the structure arrangement is accordance with logical thinking including raising questions,analyzing and solving the problems.And this article take Suzhou High-tech Company,which is not only a local government financing platform but also a public company,as the case research object.According to the thinking line of advance control,intermediate control and afterwards control,judge the quality of risk pre-warning work in Suzhou High-tech Company,and then discuss the problems existing in financial risk control from four ways of financial activities,investing activities,returns on investment and income distribution.As a local government financing platform,Temasek Holdings has accumulated experiences in controlling financing risk,and Japanese also gather experiences in the reform of local government financing platform,these end up being learning experiences for us to propose targeted measures to Suzhou High-tech Company to solve problems existing in the process of the financial risk control.This article is divided into five chapters.Chapter 1 introduces the origin of the current study.Based on the study on Financial risk management theory of domestic and international companies,Chapter 1 review the research literature on financial risk management of local government financing platform,expound the research methods and thinking framework of this study.Chapter 2 mainly discusses the theory of Financial Risk Management of local government financing platform,with emphasis on the definition of financial risk、 the different kinds and strategy of financial risk management and the heoretical basis of Financial Risk Management.Using chapter 2 as a theoretical basis,chapter 3 first introduce the company’s situation,then mainly discuss problems that exist in financial risk management of Suzhou High-tech Company,and try to figure out the reasons.Suzhou High-tech Company takes responsibility for the construction and future development of Suzhou High-Tech Zone.The company is owned by Suzhou high-tech group,and the actual controllers is Suzhou High-Tech Zone management committee,which makes it a property of local government financing platform.The company’s main business is real estate development、infrastructure construction、public work project,and so on.During the development,Suzhou High-tech Company has made a significant contribution to city construction of Suzhou High-Tech Zone.Currently,in the process of development,there appears a certain degree of financial risk,and some problems that exist in financial risk management of Suzhou High-tech Company arise.These problems can be summarized in four points ultimately: firstly,cannot identify the underlying financial risk ahead of time.Secondly,Suzhou High-tech Company bears a great financing pressure and the risk of paying the debts.Thirdly,government has made a influence on the business decision,affecting profitability of business to a large extent;finally,Suzhou High-tech Company lacks of efficiency in the management of funds.The major causes of these problems are: firstly,there lacks of relevant laws and a warning model of financial risk;Secondly,expenditure responsibilities in China’s decentralized fiscal system generally do not match revenue capabilities well;Thirdly,taking the regional development tasks,Suzhou High-tech Company’s options of construction project are limited;Finally,the money management system is disordered,and there is a lack of the sense of financial risk management.In chapter 4,for the sake o those problems,this article selects the Temasek Holdings and Japanese’s reform of local government platform as reference case.Chapter 5 is the keystone of this paper.Through learning from experiences of Temasek Holdings and Japanese’s reform,taking the company’s industry and economic environment into consideration,this article proposes Suzhou High-tech Company to take the following actions.First,the central government needs to improve the relevant laws,regulations and policies,the company should strengthen internal risk monitoring.Second,establish a standardized inancing mechanism for local government to borrow money,and ensure the capital structure of Suzhou High-tech Company more reasonable.Third,the company should make the transition to market orientation.Fourth,Suzhou High-tech Company should not only improve the fund management and its efficiency,but also improve their employment mechanism.Through the analysis of the problem existing in financial risk management of Suzhou High-tech Company,this paper presents relevant countermeasures by a special case studying.The writer hopes that these countermeasures would be helpful to Suzhou High-tech Company,not only to control financial risk effectively,but enter the market-oriented transition.After that the writer hopes Suzhou High-tech Company could lead a sound development in the future.At the same time,The writer also hopes the local government platforms which have similar problems as Suzhou High-tech Company can benefit from this paper,take measures to control and manage the risk effectively,and achieve the company’s continued、stable and healthy development.Finally,the writer hopes that this paper can make some contributions to the relevant legislative and regulatory departments,perfecting the legislation of our country’s supervise of local government financing platform.