Financial Risk Analysis And Prevention Of Local Government Financing Platform

Since the reform and opening up,with the accelerating process of urbanization in China,the capital gap of urban infrastructure has been increasing.It is impossible to fill the gap only by government financial expenditure.Local governments have sought other ways to obtain funds,and local government financing platforms have emerged as the times require.Influenced by the international financial crisis in 2008,China's economic growth has fallen rapidly,and the national economy is facing the risk of a hard landing.In order to stimulate China's economic recovery and development,the government has launched a series of measures aimed at further expanding domestic demand and promoting stable and rapid economic development.The implementation of these measures requires an investment of about 4 trillion yuan.In order to alleviate the pressure of funds,the central government has issued a series of policies to support the development of local government financing platforms,encourage conditional local governments to set up financing platforms companies,through the issuance of medium-term bills,bonds and other financial instruments to finance,to fill the gap of supporting funds for central investment projects.With the introduction of policies,the development of local government financing platform in China is blowout.In the following period of time,it has contributed tremendous energy to the construction of urban infrastructure and the recovery and development of national economy.However,in the process of development,it also exposed a series of problems,such as huge debt,single financing channel and so on.Since 2010,in order to control the risk spread of local go'vernment financing platform,our government has issued a series of policies and regulations,standardized the operation activities of local government financing platform,and local government financing platform has embarked on a market-oriented transformation path,with the development of recent years,how to solve the financial risk of the company has become the focus of local government financing platform companies.This article is divided into six parts.The first part is the introduction.This part elaborates the background and significance of the local government financing platform.Through combing and summarizing the relevant literature at home and abroad,it determines the content and methods of this study,and puts forward the innovative points of this paper;The second part is an overview of the related concepts.This part introduces the definition,classification,operation mode,financing mode and characteristics of local government financing platform,as well as the definition,type and characteristics of financial risk,which paves the way for the analysis of the following articles;The third part is the analysis of the current situation of the local government financing platform industry.This part firstly analyses the development of the local government financing platform from its financing status,operation status and national macro-policy status,and points out the common problems existing in the development of the industry.Finally,it expounds the various financial risks faced by the government financing platform at present;The fourth part is the case analysis,which introduces the basic situation of the case company,through the establishment of a financial risk system,the financial data of the company are analyzed and the analysis results are obtained;The fifth part is the financial risk prevention suggestions for the local government financing platform.Through the previous study,this part puts forward some pertinent suggestions based on the actual situation of our country and the successful experience of foreign courntries;The sixth part is the conclusions,prospects and shortcomings of the study.Through the analysis of the whole article,the conclusions are drawn,and the prospects for the future and the shortcomings of the study are put forward.Based on the research of local government financing platform at home and abroad,this paper analyses the financial risk of local government financing platform company from four aspects:financing risk,investment risk,capital recovery risk and cash flow risk,several major financial risks of such companies were identified:(1)The demand for funds is large and the financing channel is single,which makes it difficult to meet the demand for funds;(2)Low profitability,excessive dependence on government subsidies,excessive proportion of non-operating income in total income;(3)The liquidity of inventory is poor,the recovery of funds is difficult,and the turnover rate is poor;(4)Cash flow is unstable and difficult to cover debts.In view of the financial risk of local government financing platform,this paper finally puts forward some preventive measures based on the successful models at home and abroad.It is hoped that these measures can help local government financing platform effectively prevent the occurrence of financial risk,so as to bring greater social benefits to the local people.