Government Financing Platform Research Articles

Local Government Debt, Local Government Financing Platforms, and Green Development Efficiency

Local government debt (LGD), an important financing tool for local governments to achieve high-quality development, especially through the expansion of urban investment bonds led by local investment and financing platforms, has a significant impact on green development efficiency (GDE). This article starts from LGD, selects data from 30 provinces from 2010 to 2019, and uses a two-way fixed-effect model and mediation-effect model to empirically analyze the impact of LGD on GDE. The research results show that LGD has a significant inhibitory effect on GDE, and LGD can indirectly affect GDE through the degree of industrialization and the number of the urban population. This article suggests that the government should make even fuller use of LGD funds, optimize the use of relevant funds, standardize the operation of local government investment and financing platforms, reduce debt risks, promote industrial structure upgrading, promote urban population resettlement measures, and improve China’s GDE.

State de-financialisation through incorporating local government bonds in the budgetary process in China

Abstract In China, state-led financialisation through local government financing platforms resulted in a surge in local government debt. To manage financial risk, the central state introduced local government bonds (LGBs) to replace the platforms as the main financing source for infrastructure investment. The issuance of LGBs is subject to a budgetary process. We argue that LGBs mark a turn to state de-financialisation, as the local state’s financial logic of maximising value extraction from the built environment is restricted by budgetary control. Through developing a database of LGB issuance in over 400 prefectural cities, this article reveals that local indebtedness determines the geographies of bond issuance, confirming the effect of the central state’s objective of restricting local government debt. The dynamics of state-led financialisation change from the inter-jurisdictional competition in infrastructure investment among local states through local government financing platforms to a hierarchical control of LGB issuance led by the central state using the budget. Our findings show that financial expansion may mean state de-financialisation and fiscal resources are not only used to promote state-led financialisation but also to enable state de-financialisation.

Risk analysis and preventive measures of local government investment and financing platform companies

District B is the central location of the economy of Shenzhen and Hong Kong, in the 1990s the urban infrastructure construction operation and maintenance are carried out by the government, the project construction funds are government financial funds, with the rapid increase in the economic level of the district, the residents' living needs for infrastructure needs increased, the limited government financial support in District B is difficult to promote the development and construction of urban infrastructure high-speed in all aspects. The government gradually tried to promote the reform of the investment and financing system mechanism, set up an investment and financing platform, tried to promote the construction of the investment and financing system by taking the government's financial capital as the lead and using bank credit funds and social capital to participate, set up a number of local investment and financing platforms, such as construction investment companies and investment management companies, and took the initiative to undertake the government-led infrastructure and construction of major industrial projects, prompting the investment and financing platform to enter the This has led to the fast track of development of investment and financing platforms.

The Lease-debt Relationship of Chinese Local Government Financing Vehicles

In recent years, the number of local government financing vehicles in China has been increasing, the scale of development has been expanding rapidly, and the financing methods used have also been increasing. At present, bank loans are still the main financing channels, but the financing lease mode has become one of the important ways for local government financing vehicles to obtain financial access. This paper mainly studies the lease-debt relationship of Chinese local government financing vehicles, and selects the unbalanced panel data of 1435 Chinese local government financing vehicles from 2012 to 2020 for empirical analysis. The empirical results show that the relationship between the lease ratio and the loan ratio is significantly negative, indicating that the lease-debt relationship of the local government financing platform in China is a substitution relationship. Increasing the use of lease financing will reduce the use of loan financing by the local government financing platform, while the control variable bond ratio, total assets, leverage ratio and cash ratio also have a significant impact on the lease ratio, Finally, based on the empirical results, this paper analyzes and puts forward corresponding suggestions.

Credit Risk Prevention of Local Government Financing Platforms: Taking Liuzhou TK Company as an Example

Credit Risk Prevention of Local Government Financing Platforms: Taking Liuzhou TK Company as an Example

A Game-Theory-Based Interaction Mechanism between Central and Local Governments on Financing Model Selection in China

Local financing platforms and (public–private partnerships) PPPs have received extensive attention, but there are few studies on the interaction mechanism of financing model selection. This paper presents a game-theory-based interaction mechanism of local financing platforms and a PPP model based on the government heterogeneity objective function. The study results found that the central government’s tolerance of local governments participating directly in municipal projects with financing platforms or PPP models mainly depends on land price premiums. When the premium is small, the collusion between local governments and financing platforms does not violate the objectives of the central government. Then, local and central governments prefer financing platforms to participate directly in municipal projects. In contrast, the local government prefers the financing platform model when the premium is significant. The central government no longer tolerates the financing platform model and prefers to complete municipal projects with the PPP model. This study believes that promoting the PPP model is a critical way to moderately resolve the debt risk of local government financing platforms and reduce the financial pressure on local governments.

Market-Oriented Transformation and Development of Local Government Financing Platforms in China: Exploratory Research Based on Multiple Cases

In recent years, the disorderly development of local government debt financing and local government financing platforms (GFP) in China has brought huge government debt risks. In order to control the debt increment caused by illegal financing of the GFP, the state has issued a series of documents. Under the new economic form, how to determine the position, choose the road, and plan the path of market-oriented development for high-quality economic development is critical to the GFP. This paper is committed to solving the key points and transformation paths of market-oriented transformation of the GFP. (1) On the basis of literature research, it analyzes the necessity, feasibility, and current transformation difficulties of market-oriented transformation of the GFP. (2) It defines the concept of the GFP and the concept of market-oriented transformation of the GFP. (3) It collates and analyzes the real cases of market-oriented transformation of four local government (county-level and above) financing platforms, studies the key points of transformation, and systematically summarizes the path of market-oriented transformation from three aspects: the goal, work plan, and implementation scheme of transformation and development. (4) Based on the idea of finding problems, diagnosing problems, optimizing, and improving, we put forward optimization strategy suggestions.

Intelligent Government Control System Construction Based on 5G IoT

This paper presents an in-depth analysis of the construction of an intelligent government control system in the context of 5G IoT. The research has conducted performance tests and network tests on the samples of the components which debugged the problems that occurred during the tests and analyzed and improved the system. The system designed in this study is not only easy to maintain but also very reliable and safe, with a high level of accuracy, and can be used for remote “five remote” and management of switchgear and other related power equipment. Based on this model, a dual middleware PaaS service selection algorithm is proposed, and a utility evaluation strategy is used to load balance the PaaS service. The test results show that the DMPS algorithm has a high selection accuracy and load balancing capability. Combined with the experience of local government investment and financing platform financing risk management and control practices, the financing risk control system established through the study is made more feasible. From the development history of local government investment and financing platforms, we study local government investment and financing platforms from the perspective of historical development and explore the root causes of their high financing risks and possible defects in the management process of daily work. Concerning the existing laws and regulations, practical operation norms, the framework of the local government investment and financing platform system, and other objective conditions, we start to build a financing risk control system for local government investment and financing platforms from both practical and operational management aspects, to find a financing risk control system that is in line with the regulations and effective. Finally, the system will be put into practice, and the effectiveness of the system will be tested by using the simulation operation method, and the results will be adjusted in time for the shortcomings of the system. The system is expected to help local government investment and financing platforms to reduce their risks so that they can provide better services for urban infrastructure construction and become a solid link in the economic development chain.

The New Whole State System: State-led Financialization, State-Private Fusion, and China’s Innovation Policies after 2008

This article joins ongoing efforts to reconceptualize the role of the state in capitalism through the experiences of China. Using tech companies owned by Tsinghua University as a case study, we offer a novel perspective on China’s post-2008 innovation system and the renewed significance of the state in economic restructuring. Drawing on existing research about the history of capitalism and China, we contextualize China’s innovation system within its own history of interacting with global capitalism and identify five distinct new features at the conjuncture of post-2008 macroeconomic and geopolitical transformation: mixed-ownership reform, Government Guided Investment Funds, local government financing platforms, transnational investments, and (re)consolidation of party-state leadership. These new features, we argue, are defining elements of the “new whole state system” (NWSS), an emerging innovation system that deploys new market-driven financial tools to reinvent China’s socialist “whole state system”. Through historically informed multilevel empirical research, this article problematizes the state-market dichotomy to show how the Chinese state has proactively cultivated, restructured, and participated in the market to promote indigenous innovation (i.e. innovation that depends on domestic research capacity). It also situates China’s post-2008 economic reform within the global financialization trend and presents the NWSS as a spatiotemporally specific response to the shared problems of technological dependency and slowing economic growth. China’s response offers important policy lessons for other countries about the possibilities and limitations of using financial tools to restructure market institutions and direct excess liquidity to promote indigenous innovation.

The Impact of Population Aging on Local Government Debt

International evidence of Japan and European countries indicates that government debt burden could be aggravated by population aging in the long run. During recent years, population aging in China has been accelerating, with the debt burden of local government increasing simultaneously. Therefore, it is high time that the impact of population aging on local government debt should be taken seriously. However, until now there is still rare research upon whether China’s local government debt burden has been intensified by population aging.In view of this, firstly, this paper estimates the debt burden of each province from the perspective of interest-bearing debt of local government financing platforms. It covers both the explicit debt and the implicit debt, so the results are more accurate. Secondly, this paper analyzes the impact of population aging on local government debt using panel data of 30 regions in China（excluding Tibet）from 2010 to 2017. The empirical results show that the population aging has already worsen the debt burden of local governments to a considerable extent. What’s more, the panel intermediary effect analysis reveals that population aging could exert pressure on local government debt mainly from two aspects. On the one hand, fiscal expenditure on pensions would be more and fiscal revenue would be less, which will expand the numerator of debt-to-GDP ratio and push up the local government debt burden. On the other hand, economic growth slows down as population aging goes severer, which will whittle down the denominator of debt-to-GDP ratio and push up the local government debt burden.According to the prediction of the World Population Prospects（2019 Version）, the population aging rate of China will reach 16.9% by 2030, and reach 26.1% by 2050. Given that the risk posed by population aging to local government debt has been too serious to be ignored, this paper puts forward the following policies based on the mechanism analysis. Firstly, improve the pension system and reduce the burden of fiscal pension expenditures by increasing the size of personal pensions and increasing the return on investment of pension funds. Secondly, as local governments’ fiscal revenue will decline during the population aging process, it is difficult for them to accomplish the affairs arranged by the central government. It is necessary to further strengthen the central government’s authority and expenditure responsibility, so as to reduce the fiscal pressure of local governments. Thirdly, it is necessary to accelerate the innovation progress taking high-tech industries such as artificial intelligence as a starting point, so as to build up GDP and to dilute the debt burden, which can also achieve the purpose of reducing the risk of local government debt.

Investment risk model based on intelligent fuzzy neural network and VaR

Credit risk of government financing platform loans is a hot topic in economic circles. This paper briefly summarizes the literature research on government financing platforms, analyzes its risk characteristics, and tries to establish an appropriate early warning evaluation index system of credit risk. In the selection of risk assessment methods, it departs from the traditional logistic evaluation model of regression analysis based on historical data starting from the fuzzy neural network (FNN) model of artificial intelligence method. This paper quantitatively estimates the early warning indicators of credit risk of sample enterprises from the financial perspective, draws conclusions through empirical comparative analysis, and puts forward corresponding policy recommendations.

Does the Development of Fictitious Economy Inhibit the Real Economy? Microcosmic Evidence from Chinese Listed Companies

After China’s economy enters the new normal” era, the structural imbalance problems between fictitious economy and the real economy have become increasingly prominent. Under the driving force of fictitious economy’s excess return rate, the entity sector enterprises hold much more financial assets than before and gradually affect the entity’s main business, which has become one of the stylized facts of China’s economy. Therefore, understanding the impact and mechanism of fictitious economic development on micro-entity enterprises is an important prerequisite and basis for resolving structural imbalances, preventing financial risks, and cultivating new kinetic energy for economic growth. The existing research explores the interaction and deviation between fictitious economy and the real economy from multiple perspectives, but it is not sufficient to discuss the imbalance mechanism between Chinese entities and the fictitious economic structure under the current macroeconomic background. China’s economy has entered a new normal, and new features and new phenomena are constantly emerging, requiring new explanations. With the rapid development of China’s economy, only part of fictitious economy represented by banks has been unable to explain some new problems. For example, the rapidly developing shadow banking system which is outside the supervision is very worthy of attention. In addition, the maturity mismatch and credit mismatch caused by local government financing platforms also affect the real economy and cause structural imbalances. Therefore, it is necessary to further expand the relationship between the two issues, and summarize and extract new models and lessons. Therefore, this paper attempts to examine the impact of the financialization” process of holding financial sector assets on the output and efficiency of the real economy sector driven by the development of fictitious economy under the micro-enterprise level. The paper conducts empirical research through the data of Chinese listed companies. Considering the possibility of endogenous problem, it is found that the rapid development of fictitious economy after 2008 has a significant and long-term inhibitory effect on the real economy. This suppression is mainly reflected in private enterprises and manufacturing industries, and it has a more negative impact on the real economy in the new normal period” of the economic downturn. From the macro-environment perspective, the rapid expansion of shadow banking and the impact of local government financing platforms on the real economy are the main transmission mechanisms for this inhibition. From the perspective of micro-enterprises, arbitrage motives enable entities in the real sector to allocate financial assets, squeeze capital investment and ultimately reduce the efficiency of business operations. These conclusions have important policy implications for clarifying the relationship between the real economy sector and the fictitious economy sector, and the future direction of China’s financial and real estate reform. The paper may have three possible innovations. First, according to the industry and the nature of enterprises, the dynamic relationship between fictitious economy and the real economy is deeply combed, and it is found that the impact of fictitious economy on the various components of the real economy is heterogeneous. Second, given China’s economic development process, from the external and internal dimensions of micro-enterprises, the paper analyzes the impact mechanism of fictitious economic development on micro-entity enterprises. Third, as to the policy factors behind these relations and mechanisms, such as interest rate marketization reform, necessary financial industry policy coordination, and local government soft budget constraints on debt, a preliminary analysis is also conducted. The conclusions obtained by the article provide important inspirations for China to adjust the structural problems of both fictitious and the real economy in the future. The complementary relationship between fictitious economy and the real economy requires certain premise, such as hard constraints of the enterprise budget, and strictly-regulated financial fictitious economy. Therefore, it is necessary to improve the overall financial supervision, and control speculative motives from the source; to encourage the transformation and upgrading of the real economy, vigorously implement supply-side structural reforms, and realize industrial transformation and upgrading through innovation; to regulate local government financing platforms, strictly implement government debt balance management, and improve the local government debt budget management system.

Analysis of Financing Dilemma of Local Government Financing Platform

With the advancement of structural deleveraging and the strengthening of regulatory policies, local government financing platform is facing a certain financing dilemma. Starting from the financing dilemma of the financing platform, this paper analyzes the specific manifestations of the financing dilemma and the external and internal causes, and on this basis explores the direction of the financing platform to break the financing dilemma and carry out the market-oriented transformation. On the basis of matching local governments’ financial and administrative powers, the paper holds that we should promote the separation of government and enterprises, optimize the business model and debt structure of the financing platform, promote the formation of market competitiveness of the financing platform, and become the market subject of self-management and self-responsibility for profits and losses.

Credit enhancement and bond rating

PurposeThe purpose of this paper is to examine the difference of credit enhancement of variously secured bonds issued by local government financing platform bond (LGFPB).Design/methodology/approachThe approaches to secure the bonds usually include mortgage, collateral, guarantee, etc.FindingsUsing a sample of LGFPBs issued during the 2007-2013 period, the authors find that all of the approaches to secure the bonds would increase the bond rating and that compounded approaches have a higher credit enhancement effect than single approaches. Among these approaches, the requirement of collateral has the strongest enhancement effect. Moreover, the authors find that the guarantee provided by a state-owned bank or enterprise increases the bond rating more than the guarantee provided by other local government financing platforms.Research limitations/implicationsThe findings in this study suggest that the credit enhancement would be deeply affected by the approach used to secure the bond.Practical implicationsThese results can help the local government make better decisions when issuing bond.Originality/valueThis study empirically analyzes the different credit enhancement approaches for securing LGPFBs for the first time and contributes to the literature regarding credit ratings of local government bonds.

Decentralized Meritocracy

The article explains the ongoing resilience of the Chinese Communist Party (CCP) regime as a dynamic process of continual institutional adaptation of the CCP’s threat-management system, which simultaneously must address vertical (popular) and horizontal (internal) challenges. The author finds that the CCP central leadership’s current top-down intervention into subnational governments, featuring Xi Jinping’s anti-corruption campaign, reform of local government financing platforms (LGFPs), and consolidation of personal power over the party-state, is the second of two major actions over the last thirty years designed to maintain the stability and survival of the single-party system. Notably, many of the contemporary challenges faced by the regime, such as a local government budgetary crisis and rampant official corruption within subnational governments, are in many respects the unforeseen consequences of an earlier intervention by the Center conducted in the mid-1990s under Jiang Zemin.

Reproducing the city of the spectacle: Mega-events, local debts, and infrastructure-led urbanization in China

Existing studies of the growth of Chinese cities and the escalation of local debts have been done in separation. This research examines the growth and transformation of Chinese cities in relation to the practice of hosting mega-events as a means of capital mobilization and the expansion of local debts. An investigation of the case of Guangzhou, the host city of the 2010 Asian Games, has identified an interesting trajectory in which hosting mega-events has been actively pursued as a strategy of capital accumulation to stimulate infrastructure-driven urbanization. The municipal government has managed to mobilize resources from commercial banks to finance infrastructure projects and foster urban spatial restructuring through the establishment of a series of local government financing platforms (LGFPs). Because land was used as the main assets injecting into LGFPs and as collateral to obtain bank loans, the revenue generated from land sales has been of great significance to support LGFPs. However, the uncertainty of the real estate market has made land revenue volatile, resulting in looming local debts. Findings of this research cast doubt over the long-term sustainability of China's event-driven urbanization and further advance theoretical understanding of the diverse trajectories of urbanization in the era of global urbanism.

Credit Risk Analysis of Local Government Financing Platform – An empirical study based on KMV model

The local government financing platform is set up by local government through state-owned assets, real estate and equity capital. The functions of these companies are financing, construction, operation, the repaying debts. The local government financing platform can broaden the financing channels of local government in a great extent; alleviate the pressure of capital requirement. But at the same time, with the gradual expansion of the scale of debt, a series of problems has arisen: the amount of financing platform companies is huge, debt repayment depends too much on real estate price, the integration of government administration with enterprise, capital injection, and accounts of these companies are not well exposed. Once these problems outbreak, it may cause a series of financial crises, thereby threaten the entire banking industry even the healthy development of the national economy.

Local Government Financing Platforms in China

China’s rapid credit expansion in 2009–10 brought local government financing platforms (LGFPs) into the spotlight. This paper discusses their function, reasons behind their recent expansion, and risks they are posing to the financial sector, local governments, and sovereign balance sheet. This paper argues that LGFPs were a fortune for China in the past, but would turn out to be a misfortune if the causes of the rapid expansion of LGFPs are not addressed promptly. In this context, the paper proposes ways to avoid misfortune by: acknowledging and addressing the revenue and expenditure mismatches at the local government level; establishing a comprehensive framework to regulate and supervise local government budgets; ensuring the sustainability of the financial resources obtained from the sale of land use rights; and developing local government bond markets and promoting financial reforms.

Research on the Optimization of Operation Mode Based on Investment and Financing Platform in the Western China

The article mainly aims at the problems which including the single channel common existed in the local government investment and financing platform in western region, the poor ability of debt paying and the shortage of funds. It puts forward that in the operation mode industry chain business design should be appropriately extended, the financing mode should be expanded and implementation of debt restructuring. Meanwhile, it correspondingly gives relevantly alternative plan. At the end of improvement, there is more extension in industry chain business design with the local government investment and financing platform. It is not only as a function of government financing, but also as the function of the marketization of the modern company.

Local Government Financing Platforms in China: A Fortune or Misfortune?

Local Government Financing Platforms in China: A Fortune or Misfortune?