The Impacts Of Document 43 Series Policies On The Implicit Guarantee Of Urban Construction Investment Bonds

In 2008,China proposed the"four trillion"economic stimulus plan,and in 2009,China supported local governments with conditions to set up financing platforms.Since then,urban investment bonds have entered the explosive growth stage,but there are risks behind the growth.Due to the fact that most funds raised by urban investment bonds are invested in the construction of public welfare projects,such projects have the characteristics of poor profitability and long recovery cycle,etc.,the government usually supplements the liquidity funds by means of fiscal subsidies and asset allocation.For a long time,urban investment companies have the tendency to become"instruments"of government bond issuance.It is generally believed in the market that when urban investment bonds are faced with credit risk of repayment,local governments will take revenues such as fiscal funds as their"backstop",that is,there is a hidden government guarantee problem.Specifically,the urban investment bonds issued by urban investment companies affiliated to local governments with higher fiscal revenue have lower risk premium.The issuance of urban investment bonds,to some extent,increases the hidden debt burden of local governments and easily triggers the debt risk of local governments.From 2010 to 2013,the government introduced a lot of measures to regulate the development of urban investment bonds,but these measures are governance and supervision measures.The promulgation of the opinions on strengthening the management of local government debt(document no.43)in September 2014 and the adoption of the new budget law(which was implemented in 2015)show China's determination to thoroughly clean up the implicit guarantee of urban investment bonds.This policy is the"watershed"of the new and old urban investment bonds.It requires the government not to borrow money from enterprises and divest the financing function of the financing platform company.The corporate debt must not be pushed to the government,so who can borrow it,at its own risk.We will screen,liquidate and replace the existing debt issued before,and indeed the government has the responsibility to incorporate it into the fiscal budget and establish a special fund.This paper takes fixed-rate medium-term notes issued by public offering from 2009 to 2018 as research samples,and controls the characteristics of bonds,financial data of urban investment companies and macro factors.Double difference method was used to investigate the change of the credit spread of urban investment bonds before and after the implementation of the policy from two dimensions:the eastern and western urban grouping and the administrative level grouping of urban investment bonds.The net effect of per capita public revenue of local government on the credit spread of urban investment bonds was investigated by using continuous double difference method.This paper analyzes the influence of the policy on the implicit guarantee of urban investment bonds from three aspects and evaluates the effect of the policy.The study found that the policy did not completely eliminate the problem of implicit guarantee,and the per capita fiscal revenue of local government(the proxy variable of implicit guarantee)still had a significant negative impact on the credit spread of urban investment bonds,but the policy had certain effect.After the implementation of the policy,the credit spread of urban i_nvestment bonds in eastern cities tends to rise compared with that in central and western cities.The credit spread of urban investment bonds in provincial and provincial capital cities also shows an upward trend compared with that in prefectural cities.Meanwhile,the net effect of implicit guarantee is also positive.Every 10,000 yuan increase in per capita public revenue will increase the credit spread of urban investment bonds by 0.282%.The establishment of the local government financing platform was initially realized by the government's capital injection,with a strong governmental color.Over the years of development,investors have formed the inherent idea that the government will guarantee the"bottom line"of the city investment company.To truly eliminate the implicit guarantee of the government and return to marketization,urban investment companies need to transform their operation and completely get rid of the relationship with the government.However,the company transformation is not a day's work,need to take a long-term view,should be rational at this stage of urban investment bonds implicit guarantee.Finally,based on the empirical conclusions of this paper,the paper puts forward relevant Suggestions for the future development of urban investment bonds and the transformation of urban investment companies.