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Local Investment and Financing Platforms Need to Be Fleshed Out



By Xu Pengcheng, DRC


In the process of adjusting economic structure to achieve the transformation of economic growth mode, the transformation and development of local investment and financing platforms are of great importance. Its role needs to be brought into further play, but not to be weakened.

First, the functions and tasks of local investment and financing platforms need to be clarified. According to the principles formulated by the Central Government on the reform of state-owned enterprises, local investment and financing platforms, as independent legal entities, belong to public-welfare enterprises, with independent management capacity and bears the responsibility for their own profits and losses. The local investment and financing platforms should focus on enhancing infrastructure construction, fleshing out the comprehensive management of urban environment and improving people’s livelihood .

Second, a market-oriented corporate governance system should be established. The modern enterprise system and the enterprises’ internal decision-making procedures should be consummated as soon as possible, and an early-warning mechanism on debt-related risks and reserve for debt retirement system needs to be established. In addition, the market-oriented management system and corporate governance structure should be established with no delay.

Third, the supervision on local investment and financing platforms needs to be further strengthened. Local governments and relevant financial institutions should take the responsibility of supervision, perfect the information disclosure system, improve the incentive mechanism relating to work performance assessment and the fulfillment of supervision responsibilities, and make pilot practice to allow professional institutions to exercise supervision.

Fourth, the relationship between local governments and investment and financing platforms needs to be redefined. The ambiguous relationship between local governments and investment and financing platforms is not conducive to the clarification of the responsibilities and the healthy operation of platform companies. We should strictly regulate government bond issuance, standardize the credit guarantee of local governments, strictly control the total amount of government bonds, and gradually explore ways for implementing the bankruptcy system for those county and township governments with heavy debts and plagued by contradictions in accordance with relevant state laws and regulations.