Local Financing Platform: Dialectical View Of Role &Nbsp; Early Prevention Of Risks

Although the short-term debt risk of local financing is not large, precautions against long-term potential risks still need to be prepared.

We need to set local financing platform management from three aspects: fully affirming the role of the local financing platform, and governing the local financing platform, but not to get everything across the board. We must standardize and rectify local financing from two aspects of local and bank.

Since 2009, the debt risk of local financing platform has aroused wide attention and heated discussion from all walks of life.

There is no doubt that, although the short-term risks of local government debt are not large, the prevention of potential risks in the middle and long term needs to be "prepared for a rainy day".

At present, the State Council has officially cleaned up, rectify and standardize the local financing platform into the work schedule, and it is expected that the follow-up measures will be launched one after another.

In my opinion, there are three ways to tune the management of local financing platform:

First, we should fully recognize the role of local financing platforms.

Although the recent risk of local government financing platform has aroused great concern from all sides, it should not be over exaggerated.

Although there are many problems in the local financing platform, we need to look at this issue from the perspective of development and stability.

Because of the large number of local financing platforms, the operation of urban infrastructure construction projects has become more market-oriented and specialized, and has also provided an important platform for commercial bank loans.

For example, in 2010, investment in economic growth still needs to play a leading role. The matching funds of local governments are very important for investment growth. Supporting funds for local governments still need support from government investment and financing platforms.

In the long run, China is in the period of accelerated development of industrialization and urbanization. The amount of capital needed for capital construction is huge, and the role of governments at all levels in promoting urban construction and improving public services is still significant.

According to the debt level of the government system, according to relevant statistics, in 2009, the balance of our national debt was 6 trillion and 270 billion, the local financing platform liabilities were 7 trillion and 380 billion, and the non-performing assets of banks had not yet been digested. At present, the total liabilities of the government were about 15 trillion and 250 billion, accounting for 45.48% of the GDP of that year.

In contrast, Japan, the euro area and the United States accounted for 229%, 78.9% and 87% of GDP respectively.

Therefore, as a whole, our government's debt default risk is still low, and we should not overamplify and overestimate the related risks.

Second, governance must not be carried out in one size fits all.

The particularity of the local government financing platform determines that the treatment of such problems can only be sparse, focusing on standardization rather than one size fits all.

From the international experience, if the system design is reasonable, local government debt is an effective way to promote local economic development.

In this regard, good classification is an important prerequisite for carrying out governance.

The former government financing platform mostly concentrated on the provincial government. After 2008, the level of local government financing platform gradually moved to the prefecture level, district level, even town and village.

By the end of 2009, there were more than 8000 government financing platforms at all levels, of which county level platforms accounted for more than half.

From the present perspective, these platform assets can be divided into three categories: first, there is no operating income at all, such as urban roads, public culture and sports facilities; second, there are some operating income, but not completely self financing; the third category, operating income can be self financing, and only project capital is invested by finance, such as the development of new areas, urban water supply and power supply.

According to the above different types of platforms, different governance modes should be adopted. Among them, in the first category, especially the public welfare platform, financial funds should be the main solution; for second types of projects, some of them need to rely on the local government's financial resources, while others need bank loans to intervene. For the third type of projects, the principal and interest of bank loans can be reimburse by the proceeds generated after the project is completed, and it should be completely market-oriented and commercialized.

Reorganizing or reforming local government financing platform can not be simply interpreted as "one pass".

In addition to following the "endogenetic" development mode of expanding the scale of platforms through the injection of land and other assets, we should gradually reduce the function of project construction, strengthen the division and cooperation of all platforms, and take asset management as the direction of development so as to enlarge the support multiple for the sustained development of regional economy.

Third, we must standardize and rectify local financing from two aspects: local and bank.

First of all, we must strengthen the financing constraints on local governments.

The operation of local government investment and financing platform is not standardized. The main performance is: overall debt level is high, capital is insufficient or capital is not true, and the main body of debt paying responsibility is not clear.

The follow-up implementation plan will promote the pformation of local government's explicit liabilities through the hidden liabilities formed by investment and financing platform, such as strengthening the monitoring of local debt by relevant departments of the central authorities, establishing and improving the local debt risk early warning system, establishing the government's responsibility system and debt repayment guarantee mechanism, and establishing the authorization system of the local government's financing quota and time limit.

Second, we need to tighten credit control.

In 2009, the number of medium and long-term loans increased by 7 trillion and 100 billion in the banking and financial institutions. Among them, the local financing platform became one of the main force in the whole year.

However, according to the information disclosed by the listed banks, the quality of the assets of the government financing platform is high, and the bad rate is very low (basically less than 0.1%).

However, in view of the huge platform loans of local governments, it is not too early to prepare for the rainy weather.

Both regulators and commercial banks themselves have begun to attach importance to and strengthen financing platform and project loan risk management and control.

Commercial banks should choose the corresponding local financing platform according to their own operating conditions and characteristics.