The hottest new urbanization and debt risk new gam

New urbanization and debt risk: new game of local government financing

new urbanization and debt risk: new game of local government financing

October 21, 2013

[China paint information] on one side is the demand for funds for new urbanization construction, on the other side is the "hoop" of local debt risk, and local government financing is facing a new game

on August 1, the audit of local debt carried out by the national audit office is drawing to a close, and many institutions have begun to predict the overall scale and risk of local debt. As the central government promotes the construction of new urbanization, the market is more worried that it will evolve into a new round of local government investment and real estate expansion. Among them, how local governments deal with financing needs and debt risk control is the key link

"in the new round of urbanization, what local governments should take special precautions against is that on the one hand, they need money, and on the other hand, they should guard against debt risks." Huangyiping, a professor at the National Development Research Institute of Peking University, said that there are two main solutions: one is to open up new financing channels, and the other is to consider hardening the budget constraints of local governments. Whoever borrows money is responsible

New Financing Game

since the new urbanization strategy was put forward, cities across the country have successively launched the construction process of new urbanization. Taking the construction of smart cities as an example, according to the survey data of Li Yizhong, vice chairman of the Economic Committee of the CPPCC National Committee, by the end of 2012, China had 220 normal measures for the protection, commissioning, maintenance Cleaning is a must. Many cities have proposed that after low-speed impact, the composite surface is often not damaged by visual inspection, but there is obvious layered damage inside the material to build a smart city. During the 12th Five Year Plan period, the total investment scale of smart cities across the country is about 1.1 trillion yuan

however, under the background that the local debt risk is highly concerned by the regulators, the land finance of local governments has faced difficulties and financing bottlenecks

at the "2013 mayors' Forum on new urbanization in China" held recently, Zhang Xiangan, the mayor of Chuzhou, expressed the contradiction in the matter of "raising money"

first, the constraints of the construction land plan are reflected in the increasingly tense land indicators, and the land use plans given by the state are very few; The second is the obstacles of financing and credit policies. For example, the county's experimental power value also has 20n (3) 00kn. Local financing platforms below different levels cannot issue bonds, development zones below the provincial level cannot issue bonds, and short-term financing bills and medium-term bills can only be issued in cities above the provincial capital. At the same time, bank loans are almost locked to local government platforms

Zhang Xiangan said, "the contradiction of lack of money and land is becoming increasingly prominent. On the one hand, the state is strictly controlling government debt, and on the other hand, it has introduced many restrictive measures. This single policy arrangement and institutional arrangement may cause sudden fracture, thereby intensifying the potential crisis explosion."

the risk of local government debt mainly lies in finding out how large the debt scale is and how it exists. This round of audit of local debt by the national audit office is considered to be a thorough understanding of the scale of local debt

when estimating the debt proportion of the whole Chinese government at the above forum, Huang Yiping said that the debt and national debt of the central government only account for 15.5% of GDP, but with hidden debt, such as local government debt, pension gap and bank bad debts, this proportion may be about 100%

there is another important aspect of the risk of local governments, which is implicit debt. In addition to the tools that can be counted in time, such as bank loans, bond issuance and other financing products, the non-standard creditor's rights issued to local governments, such as bank financial products, trusts and insurance, are difficult to count in time into the debt scale. In addition, the opaque information increases the difficulty of supervision

according to Haitong Securities' latest estimate of local government debt, as of the end of June 2013, its total scale was between 14 trillion yuan and 18 trillion yuan, and the local debt balance was about 17.8 trillion yuan by using the data disclosed by creditors

among them, bank financing platform loans are 9.7 trillion yuan, and urban investment bonds and local government bonds issued by the central government are about 3 trillion yuan. In addition, the non-standard creditor's rights to local governments formed by bank financial management and self operation in the form of non-standard are about 3.7 trillion yuan, the non-standard creditor's rights held by insurance are 162.4 billion yuan, and the government credit cooperation is about 1.2 trillion yuan, excluding double counting

financing channels need to be expanded

in Zhang Xiangan's view, there are many ways to solve the contradiction between local government financing needs and risk control, and we should expand financing channels on the basis of controlling local debt levels and cost constraints

in the 36 local government debt audits released by the National Audit Office on June 10, bank loans and bond issuance accounted for 78.07% and 12.06% of the debt balance by the end of 2012, respectively, and remained the main source of debt funds. However, compared with the end of 2010, the proportion of bank loans decreased by 5.6 percentage points, but bank loans still accounted for most of the proportion

"if we want to do urbanization, we may first need to open up new financing channels. It should be said that it is a sustainable financing channel, rather than a single government borrowing money from banks." Huang Yiping said

according to the data statistics of the National Audit Office, the financing by means of bonds issued by local governments and loans from other units and individuals increased significantly. However, the issuance of bonds by local governments is still limited by many policies. Zhang Xiangan believes that some cities and provincial development zones have very good asset quality, very low debt level and great policy obstacles

in addition to issuing bonds, many experts have also proposed ways such as using the capital market, innovating financing tools and introducing private capital. Bao Manda, mayor of Chifeng City, said that through the guidance of the government, we can encourage, support and attract private capital to enter all fields of urban construction

"urbanization demand is characterized by diversity. In urban construction, another group, 60million small and micro enterprises in China, how to provide them with more financial services is a very important issue in urbanization." Liu Dawei, CEO Assistant of Yixin group, proposed to use technologies such as Internet and big data to play a greater role in how private capital can participate in urbanization

in addition to broadening the financing channels of local governments, Huang Yiping believes that it is also necessary to solve the problem of soft budget constraints of local governments, that is, to harden the budget constraints of local governments, "Whoever borrows money is responsible". "It is necessary to clarify the independent balance sheet of local governments. No matter where local governments raise money, the party who borrows money will consider the balance sheet and solvency. This approach is sustainable."