Comparison And Optimization Of Financing Mode Of Local Government Funding Vehicle

Local Government Funding Vehicle(LGFV)was the indispensable power for China's local economic development,infrastructure construction and urban construction.From LGFV developed all over the country in 1997,LGFV experienced the rapid development period,short adjustment period and standard development period gradually.The early times' LGFV developed based on local government's reputation and power.But after financial crisis in 2008,national ministries,commissions and supervision organizations realized the deep reason for LGFV's rapid development was because of the huge government debt.So,these supervisory commissions took actions from loose to tight.On the one hand,the LGFV faced the severe financial situation,and on the other hand,the LGFV was regulated strictly.Facing the severe situation,most of the LGFV made market-oriented transformation.However,LGFV has difficulties in financing for its bad liquidity,low revenue and limitation of assets,business and income sources.LGFV's sustainable development can't exist without stable cash flow,but its management ability limited the cash inflow of business activities.Therefore,the cash inflow from financial activities appeared to be particularly important.It's worth to explore the suitable way of financing for LGFV.Firstly,this paper researches the forming reasons and the operation pattern of LGFV through literature reviews.Besides,this paper sorts the institutional background and the current financing status of LGFV.Then,this paper finds and analyses the existed financing problems through comparing the mainstream financing modes.And then,according to the summarized theory and problems as mentioned earlier,this paper uses a municipal platform company as the case to research.The case firstly describes the municipal platform company's forming development,major financing projects and all problems of financing modes.Then the case further analyses and explores the optimization of financing ways.Lastly,this paper provides the recommendations for LGFV's financing modes' optimization.For example,LGFV needs to explore diversified financing patterns;LGFV needs to make positive transformation,such as building its profit mode to improve its strength,to achieve more financing conditions and obtain more choices;LGFV also needs to strengthen the management of debt and risk prevention.After that,LGFV can get better credit and cooperate with the funding party deeper and much more optimally.The innovations of this paper lie in the following aspects.Firstly,the existing literatures mainly focus on the financing current situation,financing behaviors and the purposes of financing,but this paper focuses on the existing financing problems and makes analysis on the financing mode to explore optimized financing mode.Secondly,this paper was wrote based on the author's working experience.This paper not only explore the theory and macro data,it also uses the surviving 10-year municipal government investment financing platform as an example to analyze various problems in the financing process,and the evolution of the financing mode.This paper also explores the feasibility of the financing mode optimization from the micro perspective.