The Influence Of Local Debt Management Policies On The Bond Spreads Of The Urban Construction Investment Bonds

The introduction of the tax-sharing reform in 1994 made the local government's financial power and authority seriously mismatched.In order to fulfill the responsibilities of the government and complete the task assigned by the superior,the funding gap of the local government is getting bigger and bigger,but the old budget law clearly stipulates that local governments cannot financing,the local government financing platform that serves as a local government financing tool has emerged,and has gradually developed into an important financing tool for local governments.The Urban Construction Investment Bonds issued by local government financing platform has become one of the important channels for local government financing.Compared with ordinary industrial bonds,urban construction investment bonds have many special features.For example,in terms of issuance entities,the issuers of urban construction investment bonds are all local government financing platforms.They all have a close relationship with local governments;in terms of main business,the issuer Basically,land development and infrastructure construction are the mainstays.The profitability in these areas is not strong,and there is less publicly disclosed information.Therefore,the investment market's risk assessment of urban construction investment bonds is more about the local government behind it than the local government financing platform itself.However,due to the lack of early regulatory system,the follow-up management of the urban construction investment bonds has not been completed.The urban contraction investment bonds have seen a series of problems such as misappropriation of raised funds,failure to disclose risk information in a timely manner,and lack of communication with investors.With the issuance of No.43 document,the development of urban construction investment bonds has seen a watershed.The local government financing platform has divested its functions for local government financing.Urban construction investment bonds issued after 2015 no longer belong to local government debt.For urban construction investments bonds issued before 2015,the government should carefully screen whether it belong to local government debt.Urban construction investment bonds which belong to local government debts,should be replaced within three years.Otherwise,the local government financing platform will be responsible for the debt payment.With the introduction of local debt management policies,the supervision of urban construction investment bonds has become more and more clear,and No.88 document has clearly pointed out the scope of local government debt,and has eliminated the local governments providing guarantees for urban investment bonds.Therefore,the study of the characteristics of urban construction investment bonds who are in the duration of the continuation period is of great significance to local governments and investors.Based on previous research,such as Zhong Huiyong(2016),Luo Ronghua(2016)and Wang Weili(2017),this paper focuses on the characteristics of urban investment bonds issued before 2015 that were not screened as local government debt after No.43 document and No.88.From the aspect of article structure and logical arrangement,the first chapter introduced the background,significance,innovations and deficiencies of the thesis selection.The second chapter introduced the relevant theories of urban investment bonds and scholars;followed by the third chapter,the causes of the city's investment debt were analyzed,and the development history and the status quo were combed.The fourth chapter is the empirical analysis part of this article,using the econometric model to study the factors that influence the spread of urban construction investment bonds.The regression found that with the promulgation of the supervision policy,for the city investment bonds issued before 2015,although they were not legally identified as local government debt,due to its particularity,investors believed that they still existed implicitly guarantee of local government.We find the guarantee has no significant impact on this part of the urban construction investment bonds,but the effect of the per capita GDP and the per capita financial income is significant.At this stage,the bond spread decreases with the increase of GDP per capita and per capita fiscal revenue.However,the administrative level of the city investment company has different influence on the urban construction investment bonds with or without the guarantee,which has a significant impact on the urban construction investment bonds without the guarantee of the third party.This is consistent with the results obtained by Luo Ronghua using the issue spreads.It shows that the implicit guarantee of local government is the result of the joint action of guarantee capability and guarantee willingness.Meanwhile,this paper finds out there is no significant impact on bond spread whether city investment company is in the list of local government financing platform.However,it is worth noting that in the early stage of the introduction of the local debt management policy,investors did not care about the profitability of the local government financing platform and believed that it was not an important factor affecting the interest rate spreads of urban construction investment bonds,but with the introduction of regulatory policies and related with the formation of a regulatory system,the profitability of local government financing platforms has attracted the attention of investors.Finally,based on the empirical research,this article put forward relevant recommendations to regulatory agencies and investors.