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Promoting the transformation of regional financing platforms into companies (No 7, 2015)
2015-01-29
Research team on institutional reform of State-owned assets management, By Zhou Jianqi and Xiang Anbo, Institute for Enterprise Research, Development Research Center of the State Council (DRC)
Report No 7, 2015 (Total 4692)
Abstract:
Assets of regional financing platforms account for more than half of local government assets. But these regional financing platforms face greater potential debt risk than regional State-owned companies and are the focus of local government reforms. Their risk comes from a lack of decision-making and autonomy in management more than in other companies. The fundamental cause of this is a government management system that does not separate governance from corporate management.
Now that the central government has forbidden local authorities to borrow through local financing platforms, they need great adjustments and need to turn into ordinary companies. Making sure that this transformation is a success will require efforts in investment and finance mechanisms, government-enterprise relationship, and corporate reforms. In addition, local government's financing also needs standardization, development mode of infrastructure and non-profit programs need reforming, the companies need restructuring to ensure the ability to pay off debts, and the modern corporate system needs improvements.
