A Study On Ancillary Financing For Local Government Special Bond Projects From The Perspective Of Fiscal Security

The matching financing for local government special bond projects is based on the system of local government special bonds,and the state encourages the introduction of market-based financing for special bond projects that meet the corresponding conditions,realising the financing model of "special bonds + market-based financing",while this model allows special bonds to be used as project capital for specific projects,greatly broadening the This has greatly broadened the way local governments use special bonds for investment.The matching financing for local government special bonds is a major innovation for the local government special bond system against the backdrop of the downward pressure on China’s economy.According to a research report by Cinda Securities,from 2020 to 2022,the scale of new special bonds used as capital for projects will be RMB158.964 billion,RMB194.786 billion and RMB283.543 billion respectively,accounting for approximately 4.4%,5.4% and 7.0%of the scale of new special bonds in that year,which is far below the upper limit of the ratio stipulated in the policy.It can be seen that fewer special bond projects were actively promoted for use as project capital,while the pulling effect on investment was not obvious,failing to achieve the policy objective better.The policy on ancillary financing for local government special bond projects began on 10 June 2019 with the Notice on Good Local Government Special Bond Issuance and Ancillary Financing for Projects issued by the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council.However,the document provides for the content of matching financing for special bond projects in a general manner,which poses more difficulties in practice and exposes the safety of financial funds to greater risks.In other words,the document fails to provide detailed and clear regulations on the selection criteria of projects,the selection criteria of financing methods,the management mode of project funds,the order of repayment of project debts and the scope of debt servicing funds.This has made it difficult for local governments to plan,package and declare projects in the early stages,manage projects in the mid-term and repay special bonds and market-based financing in the later stages.On the one hand,the lack of clarity in the relevant regulations makes it difficult to achieve the policy objectives and has little effect.On the other hand,local governments often try to attract social capital when financing special bond projects,making the financial resources more risky.Therefore,this dissertation aims to combine the theories of government-market relationship and public goods to demonstrate the reasonableness of introducing marketbased financing in the area of ancillary financing for special bond projects,and to address each of the above-mentioned issues and make relevant recommendations according to the whole life cycle of special bond projects,so as to ensure the safety of financial resources.In addition,the paper also clarifies the relationship between the rights and interests of local governments and various parties under the matching financing model,and strikes a reasonable balance between the interests of all parties,with a view to protecting the enthusiasm of market players and giving full play to the policy effect of promoting the economy and boosting investment.