Private Funds In Chongqing Want Financing Difficulties

In February 18th, the Jin Yuan hotel in Chongqing was full of friends.

From the world bank, the Asian Development Bank and Morgan Stanley, Goldman Sachs and other international investment bank executives and the Chongqing municipal government to discuss how to participate in the construction of the International Symposium on roads and railways.

Contrary to the expectations of participants, the world bank is helping Chongqing to promote the capital operation mode of Chongqing's eight major investment groups, calling Chongqing the largest city in Southwest China.

The World Bank Research Report of Chongqing's "super salesman" said that in 2003, the assets of the "eight major investments" were only 30 billion -400 billion yuan, and by the end of 2006, the assets of the eight major investment projects had soared to 190 billion 100 million yuan.

Nowadays, the total assets of the Chongqing high incidence department are as high as 80 billion 900 million yuan, and according to local media reports, the land reserves in the eight major investment projects are 400 thousand -60 mu, and the value is over 100 billion.

"Eight major investment" refers to the eight major government investment groups that have been gradually formed since 2002, such as city investment companies, real estate groups, high-fat divisions, Chongqing Fu, open investment, travel, water, water and so on, in order to solve the bottleneck of financial capital and integrate all kinds of scattered resources in Chongqing.

This "eight major investment" mainly relies on land reserve as leverage, land mortgage to bank loans and issuance of corporate bonds for investment and financing and urban infrastructure construction.

Since 2002, the Chongqing municipal government has injected five capital funds into eight major investment groups: Treasury bonds, fees, land, stock assets and tax returns.

Over the past 6 years, these state-owned investment groups have invested about 30 billion yuan a year.

Huang Qifan, executive vice mayor of Chongqing, said at the conference that Chongqing had huge demand for funds in pportation and other urban infrastructure construction, and that it was impossible for the financial sector to put so much money into it.

In order to cope with the global financial crisis, Chongqing will further expand the scope of financing of the eight major banks in addition to raising funds through bank loans, issuing bonds and listing.

The initial idea is to draw joint venture between private equity funds and eight investment groups to participate in the construction of infrastructure projects such as railways and highways or public domain projects. In addition, Chongqing also plans to promote the listing of some infrastructure and public facilities assets and strive to issue the local government bonds at an early date.

Vinod Thomas, the senior vice president and director of the independent assessment Bureau of the world bank, told reporters after an interview that, by now, the world bank has issued a total of 700 million dollars in loans to Chongqing, involving 13 projects. The next step will be to set up branch Machinery in Chongqing, and strengthen cooperation with Chongqing in five aspects of infrastructure improvement, migrant workers' employment pfer, new rural public service system construction, community medical institutions capacity construction and rural financial service system pilot system.

In order to solve the bottleneck of future development, the world bank has put forward proposals to Chongqing, adopting credit based lending methods, increasing asset management, improving corporate governance and increasing private capital participation.

In 2007, Chongqing's land leasing fee was about 35000000000 yuan, and in 2008 it was 8 billion 500 million yuan. In the first two months of this year, Chongqing had only a few land pactions, and its income was even less.

Land leasing is the main source of local government's disposable income and the main capital channel of urban infrastructure.

On the one hand, on the one hand is the sharp decline in the volume of land pactions, on the other hand, the annual spending of more than 30 billion yuan in infrastructure investment is estimated to be 33 billion 200 million yuan in 2009.

Bank loans are becoming more and more difficult and financing is far from being expected. Chongqing has to expand financing channels to ensure the sustainability of Chongqing's urban infrastructure construction.

"The support of the world bank is far from enough. The seminar jointly sponsored by the Ministry of finance, the world bank and the Chongqing municipal government is on the one hand, hoping to provide experience for urban development in developing countries through discussions on the urban infrastructure in Chongqing, and on the other hand, to broaden the financing channels and solve the financing bottleneck of the eight major investment projects."

Chongqing City SASAC, an anonymous official familiar with the matter, said the latter was the main purpose. Because of the impact of the international financial crisis, Chongqing's "eight major investment" financing channels have been greatly affected, and the sustainability of Chongqing's urban infrastructure construction is facing the risk of capital chain.

Over the years, he has been working hard for Chongqing to become a financial center in the upper reaches of the Yangtze River. The executive director of China western Hongkong investment and Financing Service Co., Ltd., Cai law, told reporters that some of his friends who had been in the top eight positions had privately disclosed to him that some of the eight companies in Chongqing had been so nervous that they could not even pay wages.

This is evident from the fact that Chongqing's "eight major investment" funds are stretched.

In this regard, Professor Chen Deqiang, who specializes in financial research at Chongqing University, is skeptical.

He believes that there are many ways to finance the eight major investment projects, such as trust and private placement.

The ten thousand step is to say that without money, these enterprises can reduce their expenses and wait for the winter.

In fact, the lack of money in Chongqing's "eight major investment" is not a special case.

China City Investment Association data show that at present, China has set up about 360 state-owned investment companies, becoming the main force of local government infrastructure construction, but now most of them are facing increasing liabilities and inflexible capital expenditure.

The Chongqing mode financing innovation suspense, the private equity fund invested in urban infrastructure construction, looks very beautiful.

According to our understanding, at present, there are four or five private studio in many securities business departments in Chongqing. At the peak time, there are more than 10 private studios in large brokerages, plus a variety of investment consulting companies, and Chongqing's local private placement agencies are close to 1000.

In February 24th, the Finance Office of the Chongqing municipal government signed a memorandum of understanding with the American Yitai securities capital group. The Yitai group will set up the Chongqing Yitai equity investment fund in Chongqing, with a scale of RMB 5 billion yuan, and the funds can be put in place within the year.

"If private-equity funds invest in urban infrastructure investment, they can get large sums of money from local private placement in Chongqing," he said.

Zheng Yougang, chairman of Chongqing Waldi financial consultancy company, told reporters that the key to the problem was that as the conference ended, there was no news that private equity funds would invest in the urban infrastructure in Chongqing.

Huang Jingsheng, managing director of the company, told reporters that due to the global financial crisis, private equity funds had been greatly affected. At present, most of the private equity funds are not well off. Therefore, the choice of new projects is more stringent than before, and the time is longer. The investment cycle has been extended from the past 3 months to half a year or even 9 months.

In addition, private equity funds lower the pricing of financing. Before it was mostly thirty percent off of equity financing, it is generally considered below half off.

Xu Fang, executive director of the United States Yitai securities, also told reporters that the liquidity of the private placement fund is not good now, and the exit channels are not smooth. The original investment return is hard to achieve, and a large amount of cash is needed to make up. Therefore, the new investment is slowing down, and private equity funds want to cash in the two tier market.

Xu Fang said that private equity investment projects generally have three basic conditions, one is the scale of 60 million -7000 million, after tax profits more than 10 million dollars; two is the project has core competitiveness, larger profit margins and annual growth rate of 10%-20%; three is the management team in line with the requirements of private equity funds.

In fact, it is rather difficult to meet the above requirements for urban infrastructure.

Therefore, under the premise that the original financing method is blocked, whether Chongqing's "eight big investment" financing channels can be smoothly changed and adjusted is unknown.