A Case Study Of Trust Default Of Yunnan Capital Company

After the financial crisis in 2008,China launched a 4 trillion investment plan to encourage local governments to set up investment and financing platform companies to actively use social funds for local infrastructure construction.Yunnan State-owned Capital Operation Co.,Ltd.(hereinafter referred to as "Yunnan Capital")is one of this kind of company established by Yunnan Provincial People's Government.However,financial risks are becoming increasingly prominent.To control financial risks,China has begun to introduce policies to prevent and mitigate risks,curb local governments' illegal borrowing.For local investment and financing platform companies such as Yunnan Capital,they will undoubtedly face tremendous refinancing pressure in the financial market after losing the credit endorsement of local governments.Especially in the case of heavy liabilities and weak profitability of assets.On January 11,2018,China Finance International Trust Co.,Ltd.issued a notice about "Yunnan Capital" failing to repay the principal and interest of trust loans on time.Since then,"Yunnan Capital" has constituted a substantial breach of contract,becoming the first provincial local investment and financing platform company to default.This paper takes the breach of trust of "Yunnan Capital" as the research object.Firstly,it introduces the background of the establishment of "Yunnan Capital",and illustrates the necessity of the existence of its debt with the theory of government responsibility and urban management.Then,this paper analyses its operation ability and debt paying ability,and draws a conclusion that Yunnan Capital can not repay its debt principal and interest by its own operation.However,"Yunnan Capital" company and its default trust plan are closely linked with local government.It is impossible to explain the root cause of the trust default as it's because of the local government's heavy debt.Finally,this paper combines game theory analysis to conclude that "Yunnan Capital" is very hopeful to obtain funds from local governments or financial institutions to repay debts.From the point of view of Yunnan Capital Company and local government,this paper puts forward some suggestions on how to solve the debt risk.This paper introduces the forming process of the debt of Yunnan Capital Company,takes the breach of trust as the breakthrough point,fully explains the seriousness of the debt problem from the perspective of company and local government,and puts forward solutions according to the actual situation.It improves the theoretical system of debt risk research of local government investment and financing platform companies,and solves platform companies' gradually exposed debt problem in some degree.