In 2019, the main focus of the proactive fiscal policy will be local government debt. The ministry of finance is clamping down on the hidden debt risks of local governments. The back door & throughout; At the same time, great efforts to open the standard debt financing ldquo; The front door & throughout; . By the end of December, local governments had issued 4.362.4 trillion yuan of local government bonds, including 3.056.1 trillion yuan of new bonds (907.4 billion yuan of general bonds and 2.148.7 trillion yuan of special bonds) and 11.148.4 trillion yuan of refinancing bonds (804.5 billion yuan of general bonds and 343.9 billion yuan of special bonds). A total of 157.9 billion yuan was exchanged for bonds (62.3 billion yuan for general bonds and 95.6 billion yuan for special bonds).
The large amount of local government debt capital inflow is intended to stabilize the level of infrastructure investment and ensure that the economic operation is within a reasonable range. However, at present, from the data level, the special debt scale has not changed the trend of infrastructure investment falling off a cliff. In addition, under the background that China's economy has shifted from a stage of rapid growth to a stage of high-quality development, the management goal of local government debt should not only be limited to stable growth, but also serve high-quality growth. If local governments for local bond funds, still continue to use traditional mode of government investment project construction operations, the government decision-making lack of restriction, insufficient market competition, project operation efficiency is low, the government and the state-owned enterprises between system level issues such as the soft budget constraint still lead to the total project life cycle cost is high. By contrast, Open the front door & throughout; PPP, another big tool, can be a powerful complement to local government debt. PPP depend entirely on the financing of social capital, on the cost of capital is not dominant, but because of the PPP project investors must through a competitive way, and through the rigid constraint contract the parties rights and obligations, establish project performance evaluation mechanism, thus through market-oriented means to break the local government investment platform company monopoly, blind investment impulse and constraint government, improve the quality of government decision-making. At the same time, the risk sharing mechanism and incentive mechanism of PPP can give play to the professional capacity of social capital and improve the comprehensive use efficiency of funds.
Thus, if they could be the organic combination of local government debt and the PPP, use the advantage of local government debt to solve financing difficulties, financing problem, use the advantage of PPP to solve decision-making mechanism, competition mechanism and the lack of incentive mechanism, local government debt and the PPP can foster strengths and circumvent weaknesses, the best combination of complementary advantages, achieve steady growth, high quality growth and guard against the risk of multiple targets. Based on this, this paper will discuss the necessity and specific ways of combining local debt and PPP from four aspects: project investment and financing, project decision-making, project construction operation management and project credit management.
Project investment and financing: form a complete closed-loop of project investment return
Whether the infrastructure projects adopt the local debt model (mainly special debt) or the PPP model, there are three key problems in the investment and financing process. Second, the implementation of project financing; Third, the project has a stable return on investment and repayment sources.
At present, local government bonds have an overwhelming advantage over PPP in terms of financing success rate and financing cost due to the credit endorsement of provincial governments. However, it is not easy for local government bonds to have project supporting capital in place. Even though special debt can be used as project capital and combined with market-oriented financing, the premise is that both special debt funds and market-oriented financing can match the cash flow of the project itself, which is very difficult to achieve. One way to solve this problem is to combine the PPP model with the local government debt model and introduce social capital into the capital raising process, with both the government and social capital jointly providing capital for the project.
Accordingly, the return mechanism of the project should also be designed as a whole according to the capital structure and financing structure. Under current regulatory requirements, revenue from PPP projects can only come from user fees and general public budget expenditures, while repayment of special debt should come from user fees and government-managed fund budget expenditures. When the level of a PPP and local government debt in the capital after the organic fusion, in the aspect of reward system also had the optimization design of space: project user fees and the general public spending to prop up part of the configurable as Fang Zi capital investment and social capital by the social capital financing risk source of loans in return, the government fund budget spending to support the part can be used as a special debt to income source. In this way, several of the problems currently plaguing infrastructure investment can be readily solved.
Project decision-making: using the market to force the government to improve the quality of decision-making
In major infrastructure investment decision-making, “ Good and fast. It's often a false statement. PPP has been criticized for its slow and difficult landing since its large-scale promotion in 2014. Slow & throughout; Behind, it is in the absence of government credit guarantee projects, social capital and financial institutions in the necessity, rationality and feasibility of the project of argumentation and audit, which just shows that the market mechanism to effectively suppress the irrational investment impulse of local government, to ensure full compliance of the pre-project, enlarge the market in the allocation of public and decisive role.
In contrast, the early work quality of local government debt is not rigid market constraints. As provincial governments have provided credit endorsements for local bonds, the issuance of bonds is almost unaffected even if there are flaws in the preliminary procedures and calculation at the project level, and large-scale local debt funds can still be quickly delivered. However, this kind of Fast & throughout; Behind, there are potential risks: in the case that the capital is not in place, the special debt fund cannot support all the capital needs of the project, and it is easy to borrow, misappropriate, and rot the tail; The calculation of cash flow is prone to blind optimism, and insufficient consideration is given to the change of plot planning and expropriation risk for resource compensation, and debt repayment crisis is likely to occur. Lend the new for the old. But the central government has begun to cap the amount of refinancing bonds, and interest rates on special bonds cannot be paid by borrowing new ones to repay old ones. At present, interest rates on special debt are rising at a rate of about $100 billion a year. In addition, due to the local debt issuance process, there is no hard and fast risk control method for the quality of the early work of the project. Build first, report later ” , & other Three-sided engineering ” It is difficult to avoid the chronic diseases that often occur in traditional government investment projects, such as the violation of land procedures. Under the strict government investment regulations, local governments will be caught between a rock and a hard place.
To solve the above problems, we can break through the gap between PPP projects and special debt projects. By introducing local debt funds to invest in PPP projects, we can help the government select high-quality projects and reduce the risk of government decision-making mistakes by virtue of the compliance of preliminary procedures of PPP projects, the rigor of financial calculation and market mechanism. At the same time, social capital bears all the construction and operation risks. The government mainly reflects the return of social capital in the investment level through the compression of construction profits, so as to motivate social capital to optimize the overall construction and operation level of the project and improve the comprehensive income of the project. Under the realistic condition that the marketization level of local government bond issuance is relatively low, the combination of PPP and special bonds helps to make high-quality projects stand out in the market. This is the process of decision-making optimization, and it is also the due meaning of high-quality economic development.
Project construction operation management: transform government functions and improve fund use efficiency
Investment and financing are only the first step in the success or failure of an infrastructure project. The quality of construction and operation of the project is the key factor determining the final success or failure of the project. In terms of cost control, the cost of investment and financing is only a part or even a small part of the whole life cycle cost of the project. In practice, the out-of-control cost of construction and maintenance in the operation phase will easily devour the advantages brought by low-cost funds in the investment and financing link. By comparing the institutional design of local government debt and PPP, it can be found that the institutional design of local government debt lays particular stress on the early-stage financing of projects. When the projects enter the construction and operation stage, they basically return to the traditional construction management mode of government-invested projects: platform companies and state-owned enterprises at the level of local governments operate and exclude external competition. & ndash; Design, construction and operation split — & ndash; Lack of long-term contract incentive and restraint mechanism, the main management mode is one case one discussion. The advantage of this model is that the progress is fast, while the disadvantage is that the investment and construction operation efficiency is low. Moreover, it falls back to the old path of the government dealing with its own state-owned enterprises, and lacks the support and restriction of external market forces. In contrast, the institutional design of PPP emphasizes the integrated management of the whole project life cycle. By rationalizing the relationship between government and enterprise, optimizing the design and construction of the integrated operation mechanism, and fully mobilizing the specialization, marketization and scale advantages of market players through the incentive mechanism, PPP improves the overall operation efficiency of the project at the mechanism level. Based on this, we believe that the PPP and special debt in construction operation link strong complementarity, the local government to solve the problem on the level of investment and financing of infrastructure project, should make the introduction of PPP, by introducing the market main body competition way, using the model of integration of design, construction, operation, and the market main body to establish a long-term contract relationship, through the performance pay regulation, to supplement the local government debt in construction operation link.
Conclusion
Vigorously promote the issue of local government bonds is the current. Stable growth and risk prevention ” At the same time, we should also recognize that no policy tool can fully address the complex needs of society. It is more beneficial to the sustained, healthy and stable development of China's economy to give full play to policy strengths, make up for policy weaknesses and make the implementation of policies sustainable and predictable than to constantly change economic policy tools and channels. At present, local debt and PPP are the two main legal government infrastructure and public service investment and financing tools in China. One plus one is greater than two. The resultant effect, to achieve the source of savings, value for money. At the same time, the growing economic downside risk situation, to turn the crisis into an opportunity to transform government functions, to build modern management mode, pipe out of fairness, efficiency, tube vitality, effectively ensuring high quality infrastructure, promoting the present China's economic growth, and for the long-term health of the economy development to lay a solid foundation. (song yaqin/article, author is Beijing da yue consulting co., LTD.)
