Risk Study On Issuing Corporate Debt By Local Government Financing Companies

The development of China's urbanization economy has entered a new stage of rapid development,and the local government investment and financing system is constantly evolving.At the same time,the issue of local government debt exceeding the red line and local investment and financing platform companies over-borrowing to support urban construction is also growing.Under the background of deepening the investment and financing system and the separation of state-owned capital,local financing companies and local governments,China's economic growth model has changed from an investment-oriented to a consumption-oriented one.The investment driving function of infrastructure projects is gradually weakening.The financing channels of local government financing platforms have become narrower,the supervision has become stricter,and the existing living space has gradually narrowed,making it necessary to enter the transition stage.However,how to complete the separation of government and enterprises,the regulation of local financing,the redefinition of financing platform,local debt control and strategic transformation are not only the dilemma that local governments and financing platform companies need to solve together.It is also an opportunity to redefine the relationship between financing platform companies in the government and economic markets.The Chinese government can deepen the process of financing platform reform by improving the investment and financing regulatory system,continuously innovating local government financing models,restructuring local debt,and improving the laws and regulations governing financing platform companies.And the platform company should realize the entity management from the diversified development to complete this transformation.This paper analyzes the fundamentals of the company after D city state-owned capital operation limited liability company undertakes the shantytown reconstruction project led by D city government,and analyzes the company fundamentals after the project issues corporate debt for the project,and then putsforward the transformation road of the financing platform company.Suggestions,There are three reasons for choosing this case for analysis: First,financing platform companies are the products of China's characteristic economic development.The main business content is to undertake government urbanization development projects.Most of these projects are public welfare or semi-business.The economic sources of financing platform companies 'management costs for project construction mainly depend on local government financial subsidies and foreign financing,and their own independent management ability is difficult to meet the standards for the operation of modern enterprises.This case covers the entire process involved in the issuance of corporate debt by local government financing platform companies.Second,from 2014,when the Chinese government issued a policy document on regulating local government financing,to 2017,it issued several articles prohibiting local financing platform companies from borrowing and financing for local governments in violation of regulations,and strongly demanding that financing platform companies be stripped from local governments.To clarify the debt relationship between local governments,financing platform companies and financial institutions,it is necessary to promote the tangible transformation of the platform.The issuer of this case is currently in a transitional stage and has a good current affairs.Third,in 2014,China entered the peak period for the establishment of financing platform companies,and in 2015 it gradually entered the outbreak period for the issuance of corporate debt.The issuance period of corporate debt is mainly concentrated in 7-10 years,and the third year has entered the principal repayment stage.Limited support for the platform company,irregularities in corporate debt,and the issuer of the bond is about to enter the principal repayment stage,through the impact on the issuer of the local government,the basic analysis of the issuer,and the study of the investment project,It is an important task for local governments to develop innovative transformation of financing under the pressure of debt service.