Research On The Influence Of Implicit Guarantee On Chinese Urban Investment Bonds

The so-called urban investment bonds refer to bonds issued by local government financing platforms.The types of bonds include corporate bonds,corporate bonds and bond financing products provided by the inter-bank market.Since its birth in 1992,Chengtou has made significant contributions to my country’s infrastructure construction,including old city renovation,factory building construction,resettlement housing construction,road and pipeline construction,etc."The role of local government financing is the right-hand man.Given the close relationship between chengtou bonds and local governments,the market often expects that when chengtou bonds default,the relevant local governments will bail them out.Implicit Guarantee".The release of "Document No.43" in 2014 gradually brought implicit guarantees into the attention of scholars and the market;however,scholars’ research found that,unlike the policy goal of the separation of local governments and chengtou bonds,chengtou issued after 2014 There are still strong implicit guarantee expectations behind the bonds.In the process of issuing and pricing urban investment bonds,whether factors related to local governments reduce the issuance spread of urban investment bonds,and whether the influence of the local government on the issuance spread of urban investment bonds can be quantified and analyzed? This article attempts to address two issues.In order to achieve the above goals,this paper first summarizes the literature of domestic and foreign scholars on bond pricing and the implicit guarantee of urban investment bonds,and believes that the use of the "interest spread estimation method" can more accurately estimate the hidden hidden behind each urban investment bond.Guarantee expectations;further,this paper decomposes the implicit guarantee,and divides the local government’s implicit guarantee into two influencing factors: implicit guarantee willingness and implicit guarantee ability.The release of "Circular 43" has gradually brought "implicit guarantees" into the sight of scholars and the market.However,unlike the policy goal of divesting local governments and urban investment bonds,the research of many scholars has proved that there are still strong hidden guarantee expectations behind urban investment bonds issued after 2014.Although,urban investment bonds have made significant contributions to China’s infrastructure construction,including the transformation of old cities;but the hidden debt problem of local governments brought about by urban investment bonds is also difficult to ignore.In the second half of 2021,economic growth was restored;the urban investment bond supervision policy once again "shifted from stable growth to risk prevention",and resolving local hidden debts became the focus of local governments.In view of the hidden debt risk implied by urban investment bonds,how to determine the hidden guarantee behind urban investment bonds and explore how local governments affect the market’s implicit guarantee expectations for urban investment bonds have become a major problem in the academic community.Specifically,this paper selects the issuance data of general corporate bonds and general corporate bonds(wind statistical caliber)issued by local government financing platforms and private enterprises from January 1,2016 to June 21,2021,which were issued by local government financing platforms and private enterprises and listed in the interbank market as research samples,and proved that the urban investment bonds issued by local government financing platforms have hidden guarantee expectations through the dual verification of the "spread estimation method" and the "virtual variable method".The spread estimation method is used to transform the implicit guarantee expectations behind a single urban investment bond into a quantifiable indicator.Further,this paper takes the implicit guarantee expectation of urban investment bonds as the explanatory variable,and the implicit guarantee ability and implicit guarantee willingness of local governments as the explanatory variables for empirical testing.The results show that local governments mainly influence the implicit guarantee expectations of urban investment bonds through implicit guarantee ability and implicit guarantee willingness,and the stronger the implicit guarantee ability and implicit guarantee of local governments,the greater the hidden guarantee expectation of urban investment bonds;in addition,the qualification of the local government financing platform as the issuer can also affect the implicit guarantee expectations,which is manifested in the poorer the qualifications of the issuer and the stronger the market’s implicit guarantee expectations.Based on the above research conclusions,this paper puts forward four policy suggestions to promote the construction of the urban investment bond market and break the "rigid payment belief" of urban investment bonds;improve the level of marketization;add implicit guarantee expectations as a factor to assess the risk of urban investment bonds;improve the transparency of decision-making before issuance,and strengthen the supervision of funds raised after issuance.