Wind shows that in the first half of 2022, the audit of urban investment bonds issuance is still strict, and the overall financing environment is still tight. Urban investment bonds issued a total of 2.64 trillion yuan, down 7% year-on-year, and net financing was 937.9 billion yuan, down 2 1% year-on-year. In terms of funds, market liquidity remains relatively reasonable and abundant, and investors still favor urban investment bonds. The financing cost of urban investment bonds has generally declined, and the spread of secondary transactions has also narrowed.
Fan Jungen, a senior analyst in the rating department of CSI Pengyuan City Investment, believes that since last year, the financing supervision policies of city investment companies have been intensively introduced to regulate the financing of city investment companies and prevent local government debt risks. Although the supply side of urban investment bonds is greatly affected by the examination and approval policy, urban investment, as an important participant in infrastructure construction, is an important starting point for steady growth. In the second half of the year, the reasonable financing demand of city investment companies is generally guaranteed, but it is the red line not to increase hidden debt.
Under the background of "tight balance", how can city investment companies wrestle with new opportunities in the new environment? Gao Lu, deputy general manager of Dongfang Jincheng Public Utilities Department I, suggested that some city investment companies with weak qualifications could consider the ideas of bond replacement and restructuring, asset optimization and integration, and market-oriented transformation, so as to keep the bottom line of no increase or decrease and enhance their solvency.
Control increment and change stock.
According to the data of the Ministry of Finance, from June to May 2022, the local general public budget revenue at the corresponding level was about 4.62 trillion yuan, down 8.9% year-on-year, and the local government fund budget revenue at the corresponding level was about 2.05 trillion yuan, down 27.6% year-on-year, of which the revenue from the transfer of state-owned land use rights was 1.86 trillion yuan, down 28.7% year-on-year. Fan Jungen believes that the local financial pressure has also increased, and the city investment company has been supported or affected by the local government.
Gao Lu believes that the financing environment of urban investment companies will be divided into two stages in the first half of 2022. In the first quarter, because the exchange and dealers association 202 1 classified the city investment companies according to "red, orange, yellow and green" and "first, second, third and fourth types of enterprises", the exchange restricted the excessive financing of the city investment companies with weak qualifications. At the same time, the China Banking Regulatory Commission issued "Guiding Opinions on Banks and Insurance Institutions to Further Prevent and Resolve the Hidden Debt Risks of Local Governments", restricting the introduction of a series of regulatory policies on urban investment and financing, such as new working capital loans for urban investment companies that bear the hidden debts of local governments. The financing of urban investment companies continued to tighten, especially for low-level entities, and the tightening varieties were mainly private debt.
Gao Shuang, a senior analyst of CSI Pengyuancheng Investment Rating Department, believes that with the continuous promotion of a number of implicit debt resolution measures, the local implicit debt risks are gradually released, and the risks are generally controllable. This year, the Ministry of Finance reported many cases of false hidden debts and new hidden debts, which sounded the alarm for local governments to resolutely curb new hidden debts and effectively resolve hidden debts. In the way of debt conversion, since 20021,the number of provinces that issue refinancing bonds for the purpose of "repaying existing debts" has been increasing, and the scope of the pilot project of implicit debt resolution is also expanding. In addition, some regions with conditions have taken the lead in launching a global pilot project of no implicit debt, and steadily promoted the work of clearing implicit debt. The central government also proposed to improve the long-term mechanism to prevent and resolve the hidden debt risks, mainly including curbing the increment, making a good start, resolving the stock, strengthening the accountability, and transforming the platform, which also provided further guidance for the subsequent work to resolve the hidden debt.
In the view of many interviewees, in the first half of this year, "controlling increment and exchanging stock" is still the focus of city investment. In this regard, how should city investment grasp financing opportunities? Fan Jungen suggested that the progress of local bond issuance was advanced in the first half of this year, and the scale of new special bond issuance accounted for 93.3% of the new special bond issuance limit for the whole year, of which the new special bond issuance was borne by the city investment company. For city investment, obtaining special debt funds can reduce the pressure on the company's project construction expenditure, and we should still actively strive for special debt quotas in the future.
Regarding whether there will be systemic risks, Gao Road analysis believes that in recent years, with the continuous tightening of implicit debt control and urban investment supervision policies, the credit risk and refinancing differentiation of urban investment industry have intensified, especially for urban investment enterprises with weak regional financial resources, heavy debt burden and poor past debt performance history. However, compared with the previous two years, with the tightening of regulatory policies, the overall growth rate of urban investment bonds has slowed down, and considering the government's determination to firmly hold the bottom line of systemic risk, the probability of systemic risk in urban investment bonds this year is still very low.
How to wrestle in the second half?
Some insiders believe that the financing of urban investment bonds in the second half of the year will be the idea of "total reduction and structural optimization".
From the financing point of view, Gao Lu believes that the overall policy tone in the first half of 2022 is to promote infrastructure, to cope with the contraction of supply and demand in advance through infrastructure, and to alleviate the downward pressure on the economy. Considering that some infrastructure financing has been overdrawn in the first half of the year, the implicit debt accountability mechanism is still strict, and it is expected that the financing difficulty of AA-level weak qualified subjects will remain great in the second half of the year. "AA-class city investment wants to survive. First, it needs to be converted into debt to improve financing capacity; Second, it needs transformation to improve profitability and cash-out ability. From the perspective of transformation, first, the infrastructure projects undertaken should focus on projects with self-balanced income and reduce the construction of purely public welfare projects; Second, based on the traditional urban investment business, through the operation of built assets, it will transform from construction and development to operation business; Third, relying on the state-owned assets and resources in the region to revitalize state-owned assets and carry out (quasi-) public welfare and (quasi-) business operations to obtain stable cash flow; The fourth is to get involved in the market-oriented business with light capital or fast capital turnover, which not only avoids a large amount of capital investment in the early stage but also obtains relatively stable cash flow. "
In terms of business, Fan Jungen believes that in recent years, the supervision of urban investment companies has become increasingly strict, and various policies have been introduced one after another, speeding up the divestiture of government financing functions of urban investment companies and promoting the standardization and market-oriented transformation of the debt mechanism of urban investment companies. Jiangsu, Zhejiang, Shandong, Jilin and other provinces have also issued responses.
For example, Fan Jungen said that at present, the transformation of city investment companies is mainly based on business transformation. The "substantial" transformation requires higher regional resource endowment, and there are not many successful urban investment companies. At present, the transformation direction of urban investment is urban public product service providers, such as Shanghai Urban Investment Group and Nanjing Urban Construction. Comprehensive park service operators, such as Suzhou Industrial Park and Zhangjiang Group; Regional real estate developers, such as Shanghai Lujiazui Group and Suzhou.
Fan Jungen suggested that the focus of the transformation of city investment companies should first clarify the status of city investment companies, such as integrating city investment companies in the region and concentrating on "government support"; Secondly, we need strong external support, seek the support of high-quality government assets, resources and business, and promote the effective integration of assets; At the same time, actively plan the company's business development layout, improve its own business hematopoietic capacity, improve the corporate governance structure, and enhance organizational management and control capabilities. However, judging from the successful cases of transformation, the transformation of urban investment has higher requirements for regional economy, financing environment and resource endowment.