Although local government investment and financing platforms also have risks and various problems, the risks are controllable and problems are usually dealt with and solved. Local governments will not and should not let them go bankrupt.

The local government investment and financing platform refers to the local government in various parts of my country that is established to raise funds for the investment and construction of urban infrastructure, including urban construction investment companies (referred to as urban investment companies), urban construction development companies, and urban construction assets. Various types of construction companies such as operating companies use land and other assets allocated by local governments to form a company whose assets and cash flow can roughly meet financing standards. If necessary, they can be supplemented by financial subsidies as repayments. Commitment to focus on investing the integrated funds into municipal construction, public utilities and other projects.

Local governments have established investment and financing platforms to finance infrastructure and urban construction for some time. The investment and financing platforms truly played a leading role when my country’s financial crisis began in 2008. In early 2009, the People's Bank of China and the China Banking Regulatory Commission jointly issued the "Guiding Opinions on Further Strengthening the Adjustment of Credit Structure to Promote Steady and Rapid Development of the National Economy", proposing to "support qualified local governments to establish investment and financing platforms, issue corporate bonds, Financing tools such as medium-term notes can expand supporting financing channels for central government investment projects." This is also regarded by local governments as an affirmation and encouragement for local government investment and financing platforms.

However, as the number and financing scale of local government investment and financing platforms show a rapid development trend, more and more problems are emerging. Due to the imperfect corporate governance structure of local government investment and financing platforms, the responsible entities are not responsible. clear, operating procedures are not standardized. At the same time, local governments often obtain credit funds from multiple banks through multiple financing platform companies, forming long-term borrowing. However, the overall liabilities and guarantee commitments of banks to local governments are not clear at all, and even local governments have no clear understanding of their overall liabilities and guarantee commitments to local governments. Even the debt situation of one's own financing platform is unclear. Once the investment income of the investment and financing platform cannot cover the costs, these "hidden debts" will inevitably become explicit, causing huge pressure on local government finances, and even have to be financed by the central government in the end. Pay the bill with commercial banks. If allowed to worsen, it will pose the following risks and crises:

1. Local finances are stretched thin.

The proportion of central government revenue has increased rapidly, basically achieving the expected goals of the reform. However, there is also a tendency to increase financial power and decentralize administrative power. Local governments have a lot to do. But financial resources are limited, and budget laws do not allow him to borrow openly. Therefore, local government investment and financing platforms provide financing through bank loans and provide various forms of guarantees during the loan process, which hides greater risks. On the other hand, some local governments also have serious hidden liabilities, so some guarantees are not practical.

2. Commercial banks’ short-term deposits and long-term loans make credit risks prone to misalignment of terms.

Since local government platform loans are generally guaranteed by local finance, even if there is no guarantee, because it is a government project, commercial banks are still willing to lend to local government platforms. However, due to the opaque status of local government investment and financing, banks have limited financial information from local governments. It is difficult to fully grasp the platform's liability status, especially after commercial banks have poured into the industry, and credit risks are prone to maturity misalignment.

3. The quality of platform assets and its functions have led to the continuous accumulation of risks on this platform.

Due to the limited financial resources of local governments when setting up platform companies to obtain bank loans, the platform’s capital is insufficient and the platform’s own ability to resist risks has been reduced. In addition, the governance structure of some local government investment and financing platforms is not sound, and the management level and operating level have certain limitations, which leads to the continuous accumulation of risks in this platform.

Based on the above risks and problems, the central government and various localities have also taken corresponding preventive measures:

(1) Reasonably position the functions and investment and financing fields of local government investment and financing platforms and limit the assets of the platforms Debt ratio.

By standardizing the investment and financing behavior of local government platforms, we can achieve reasonable positioning.

Clarify the investment and financing areas of local government investment and financing platforms, such as infrastructure construction, and try to let private enterprises do anything that private enterprises can do. At the same time, strengthen supervision of the use of platform financing to avoid misappropriation of project loans.

(2) Enrich the paid-in capital and improve the company's corporate governance structure

By inspecting the capital status of local government platforms, we will make sure that platforms with insufficient capital or false information are closed within a time limit. In fact, there are unified regulations on the asset-liability ratio of the platform, and it is appropriately linked to the local financial situation. At the same time, we will improve the company's corporate governance structure, improve the platform's operation and management level, and clarify the scope of information that the platform should disclose.

(3) Establish and improve the debt management system of local governments

By establishing and improving the debt management system of local governments, clarify the responsibilities of local governments to the platform and strengthen the debt of local governments to the platform Centralized management. Establish unified management of government debt by local financial departments. Establish local debt repayment funds. Local governments shall establish debt repayment funds that are compatible with local platform debt regulations, formulate local platform debt repayment management measures, and stipulate corresponding debt repayment procedures.

(4) Solve the financing problem of local government’s infrastructure construction.

Under the constraints of appropriate systems or procedures, local governments can solve the problem of local government infrastructure construction financing by issuing local bonds.

To sum up, the current risks and various problems existing in local government investment and financing platforms are all risk controllable. The national and local governments will ensure that local government investment through policy adjustments and supervision. The financing platform develops healthily and orderly.