In the context of the state council's focus on deepening economic institutional reform in 2014, in which the financing platform's government financing function was detached from the department of state, the economic reference journal's journalists have found in multiple places that some local financing platform companies are in the form of “package companies” run by grass-roots political officials, with only two or three full-time staff and two brands of financing platform companies with functional departments or business units. Under the umbrella of local governments, however, some of the normative financing measures to mitigate risks have been used as “back-to-back” to borrow government debt, local governments continue to default in investing in or providing guarantees to finance platform companies, land reserve centres fail to integrate with finance platform companies, and the risks of operating finance platforms and debt risks have accumulated. Behind this is the fact that the financing platform company, while assuming the function of government investment financing, is also seen as a market subject that interacts with financial institutions, with a deformed operating model that leaves them out of regulation。
Finance platform to buy cars for local officials
At one time, the drawers of a county cadre contained the marks of a number of platform companies and went out to finance something like “tommy”, so that a bag could be packed. Any company that is suitable for financing uses the formalities of that company。
An interview with the economics reference newspaper revealed that the level of operations of finance platform companies is currently uneven across the regions and that in some less developed regions finance platform companies have similar work programmes with staff from the top to the bottom of the line。
In hunan, before the recent renovation of the financing platforms in many districts and municipalities, the head of the company was a group of grass-roots government officials, and the company was a “package company”. Journalists sit in a county city with local executives, fiscal cadres and heads of four major platform companies, so that a small conference room can be filled. The directors of these companies are often co-chaired by local deputy mayors, deputy county governors, etc. Several key players in the company are heads of local government departments。
A county cadre said that at one time his drawers had been marked by many platform companies, and that out-of-house financing was like “tommy”, so that a purse could be packed. Any company that is suitable for financing uses the formalities of that company. Some of the companies concerned have two or three full-time staff. The directors of these companies, while doing tens of millions and hundreds of millions of dollars, have no incentive or appraisal mechanism, and some of their employees are government-funded staff, who receive wages ranging from several thousand yuan a month at the level of a department and a branch。
In some locations in the north of the lake, the financing platform company is a two-plated team with a functional department or business unit. “the company operates in an integrated manner with the municipal land reserve centre, 36 of whom are career-built and placed under the land reserve centre.” in another municipality, the employees of the city investment corporation are also career-oriented, as it also has the status of the urban construction finance management office。
The fragmented business model of the financing platform companies has given some party leaders an excuse for not complying with integrity requirements. A recent survey in a hunan district found that the county-wide official vehicle fleet, with an authorized strength of 387, was actually larger than that, and that the problem was that it was over-standard, over-staffed, purchased on behalf of enterprises, private individuals and associations, and used vehicles on a permanent basis in various names. In the course of the clean-up, the district secretary took the lead in handing over a toyota hlanda land cruiser, with a 3. 5-l charge, which was purchased in december 2011 by the property registry as a county input company and used by the district commission。
The responsible officials in the district informed journalists that they had checked their own affairs and that the financing platform had been made available to key local leaders and was universal in its vicinity and throughout the country。
Company directors don't know where they're going
“for example, there is a recent capital project on the platform to make a pre-approval, and the approval report is so obfuscated that the original approval was to change a place name on a ready-made template, and this was a replacement when the key words were lost!”
While assuming the function of government financing, on the one hand, and being the subject of a market interface with financial institutions, on the other hand, the deformed operating model leaves the financing platform company outside of regulation, without complying with market fundamentals and completely complying with administrative directives, and on the other hand, the lack of external regulation makes it difficult to implement some of the measures of risk control in practice。
As a result of previous approval monitoring, some cadres at the grass-roots level reflect the fact that functional departments are now charging more, less and less for the financing of platform companies. The head of a local-level municipal finance platform in hunan said that government regulation could be summarized in one sentence: “the fees are numerous and too high”. Each project is set up from researchable report preparation, evaluation to environmental assessment, transport evaluation, energy, water and forestry, without charge. The total evaluation cost is estimated at about 2 per cent of the total project cost, with some approvals being paid for, and some passing through。
He said, “for example, there's a capital project on the platform in the near future to do a pre-approval, and the approval report is a misnamed name, which was originally referred to as a change of name on a ready-made template, and this was a replacement when the key words were lost!”
Pre-trial supervision is formal and non-existent. Many members of the national finance committee [weibo] and the bureau of development and reorganization, who serve as directors of the finance platform, complain that the finance platform corporation is both a functional arm of the government and a corporate body in the market, with a dual role, and that it is difficult to open a board of directors once a year, not to say regulation, and that it is unclear how the company operates and where the financing goes。
The deputy director of the state administration of a municipality in the central province said that there was a difference between the financing platform companies and the general state-owned enterprises and that it was unclear what the concept was. How can they be regulated by the fact that they are both business enterprises and a proper county unit, equal to the national investment agency, with each of them having a mayor? Moreover, the financing platform companies are moving directly around the core work of municipal councils, and many national finance committees [webbo] have no say。
A staff member of the grass-roots development and rehabilitation agency said that, following the delegation of pre-trial powers from the national commission to the provincial development departments, the local development offices had assumed responsibility for the risk control and monitoring of corporate bonds for the duration of their existence, which was difficult to enforce, as was the case with the same-level disciplinary committee, which could not supervise the same party. Large projects are often directed by local leaders, and the retrofitting department can only cooperate, knowing that the project actually went against the declaration and could not be dismantled。
Within the financing platform company, staff members are left behind and no one is accountable to the company. One county finance platform company in hunan faced clean-up, and most “heads” chose to resign and continue to serve as their own civil servants because they considered the platform company to be hopeless and unreliable. In the view of some hunan cadres, this fragmentation of the county-level platform may result in the creation of a management blind zone in some government-financed projects, some of which the head of the financing platform company did not even want to pick up the phone after writing his resignation report。
There's more to risk
Under the umbrella of local governments, some of the normative financing measures to mitigate risks have been used as “back-to-back” and some platform companies not only do not clean up, stop, but also continue to operate in an irregular manner and are thirsty。
The lack of external oversight and the lack of motivation on the part of corporate management for long-term business considerations have led to the accumulation of risks for the financing platform companies. At the same time, the financing platform company, which is heavily tied to local governments, has also reduced some of the risk mitigation measures of the relevant ministries of the country by continuing to finance irregularities and instruments to leverage leverage。
Journalists have learned that some financing platform companies only consider immediate investment needs and pay no debts at cost. When market interest rates reached historic highs at the end of last year and the beginning of the year, there were still urban investors who paid their debts at that point. There are also concerns among cadres in the grass-roots development sector that, in some areas, financing platform companies may already be at high risk, but the financing platform companies do not provide early warning to allow risks to develop until they erupt. For example, in april 2011, yunnan road development investment ltd. Sent a letter to its creditor bank stating that interest payments would only be non-payable as of that date, and that the company had a loan balance of nearly hundreds of billions of yuan from a dozen banks, such as construction, opening and construction banks, which was well beyond its capacity to pay。
In their investigations, journalists have learned that some of the normative financing measures to mitigate the risks have been described as “stand-in” under the umbrella of local governments, and that some platform companies have not only failed to clean up, stop, but continue to operate irregularly and to thirst。
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