The battle to clean up and standardize local financing platforms was officially launched.
On the 13th, the China Government Network announced the "Notice on Issues Concerning Strengthening the Management of Local Government Financing Platform Companies" issued by the State Council on June 10 (hereinafter referred to as the "Notice"). The "Notice" requires a strict distinction between public welfare and commercial projects. For public welfare projects whose repayment sources mainly rely on fiscal funds, they will no longer be financed through financing platform companies.
According to sources, the Ministry of Finance, the National Development and Reform Commission, the People's Bank of China, the China Banking Regulatory Commission and other departments have begun to formulate detailed rules and specific implementation plans to improve relevant policies and strengthen the guidance and supervision of this work. The "Notice" requires all localities to report to the State Council before December 31, 2010.
Government guarantee debt or old and new cut off
For the stock debt, the "Notice" requires that local governments at all levels should conduct a comprehensive liquidation of the company's debt on the financing platform, and properly handle debt repayment and subsequent financing of projects under construction in accordance with the principles of classified management and differential treatment.
According to the statistics of the regulatory authorities, as of the end of 2009, the loan balance of local government financing platforms was 7.38 trillion yuan, an increase of 70.4% year-on-year, accounting for 20.4% of the balance of general loans. 34.5%.
The "Notice" requires that local governments at all levels should implement the debt-paying obligations of the relevant debtors. The stock debt of the financing platform company shall be repaid in accordance with the agreement, and the original creditor-debt relationship shall not be unilaterally changed, and the debt-paying responsibility and debt evasion shall not be passed on.
The Notice also reiterates the strict implementation of the Guarantee Law, and local governments at all levels must not directly or indirectly provide guarantees for financing platform companies with financial revenue and state-owned assets.
Guo Tianyong, director of the China Banking Research Center at Central University of Finance and Economics, said that the document did not indicate whether the guarantees provided by the local government for the financing platform were effective. Such guarantees have become a fait accompli.
Guo Tianyong said that if the previous guarantee is invalid and the local government only bears limited liability for the scope of capital contribution, it may lead to the manifestation of the bank ’s debt risk. The biggest possibility is to adopt the new and old cut-off methods. However, new government guarantees will not be allowed in the future.
Public welfare assets shall not be injected into the financing platform
One of the worries about the risks of local financing platforms is that there may be bad projects and projects after the capital chain breaks. This “Notice†requires that for projects under construction originally planned to be financed by financing platform companies, their follow-up funds should be based on different The situation is handled properly.
For public welfare projects under construction that rely mainly on financial funds for repayment, they should no longer continue to be financed through financing platform companies. They should use social budgets and other channels, or adopt market-oriented methods to guide social funds to solve the problem of construction funds.
Guo Tianyong believes that in the future, public welfare projects and commercial projects should be strictly differentiated to rationalize government functions. For commercial projects, private capital investment should be handed over to the government. The government reduces the investment burden and uses limited funds for public welfare projects. For public welfare projects, on the one hand, local governments must live within their means, on the other hand, they can issue local bonds, etc. Ways to solve the financing problem of public welfare projects.
With regard to the cleanup of platform companies themselves, the "Notice" requires that financing platform companies that only undertake public welfare project financing tasks and mainly rely on financial funds to repay debts should not undertake financing tasks in the future; The financing platform company that also undertakes the construction and operation tasks of public welfare projects should divest the financing business after implementing the debt repayment responsibility and measures, and no longer retain the function of the financing platform; undertake the financing tasks of public welfare projects with stable operating income and mainly rely on itself Financing platform companies that repay debt with proceeds, as well as financing platform companies that undertake non-public welfare project financing tasks, should, in accordance with relevant regulations, enrich company capital, improve governance structures, and realize commercial operations.
The "Notice" clearly states that public welfare assets such as schools, hospitals, and parks may not be used as capital injections for financing platform companies.
Local debt included in budget management
In terms of specific division of labor, the State Council requires that the Ministry of Finance, together with the relevant departments, accelerate the establishment of a financing platform company ’s debt management information system, accounting and statistical reporting system, and a regular reporting system for the financing platform company ’s debt information, so as to achieve full Caliber management and dynamic monitoring.
The "Notice" proposes to include local government debt revenues and expenditures in budget management. This is also the first time that officials have proposed to incorporate local debt revenues and expenditures into budget management. Previously, the funds of local financing platforms belonged to extra-budgetary management and were dissociated from the financial supervision system. The resulting state of non-disclosure and opacity was one of the important reasons for the increased risk of local financing platforms.
According to the provisions of the current "Budget Law", local governments have no right to issue bonds. At present, the form of local bonds issued by the Ministry of Finance is adopted.
However, Zhu Xiaohuang, deputy governor and chief risk officer of China Construction Bank, believes that the Ministry of Finance issues bonds on behalf of the state credit, while the direct issuance of bonds by local governments is entirely based on the credit of local governments, and the substance is very different. He suggested gradually liberalizing the restrictions on local government debt issuance and introducing a market-based financing mechanism.
Guo Tianyong believes that in addition to allowing local debts to be borrowed, the effect of the current tax-sharing system should also be tested and evaluated. At present, local governments have less money and more financial resources, and the mismatch between financial power and power is one of the important reasons for the proliferation of local financing platforms.
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