Author: Yin Haijiao, senior consultant of Zhongtian Huapu
City Investment Company is a kind of "special" company. It is an economic entity established by the local government and its departments and institutions through financial allocation or injection of assets such as land and equity, which undertakes the financing function of government investment projects and has independent legal personality. City investment companies in a broad sense include various platform companies such as urban construction, parks, transportation investment, water investment, agricultural investment and cultural tourism investment.
City investment company is a kind of company with "characteristics". There are no ministries and departments in the world, which is different from the general line management. For example, the Finance Bureau is subordinate to the Ministry of Finance, and as an independent individual, it is committed to the overall development of the city.
City investment company is a kind of company with "characteristics". It was established under the background of the integration of government and enterprise, leaving behind genes deeply influenced by policies, so it will be a long-term proposition to seek market-oriented transformation and development under the strong influence of policies.
First, the basic situation of urban investment enterprises
1. Basic positioning and functions of urban investment enterprises
City investment company is funded by local government, mainly engaged in infrastructure and land development. Therefore, behind the city investment company, there is often an "invisible endorsement" from the government. Their basic positioning is "financing platform", "investment carrier" and "government second finance" of local governments, and they have two basic functions of financing and investment.
2. Business model and profit model of urban investment enterprises
There are two typical government financing platforms: one is financing for local governments, which is a financing tool; The other is to do projects for local governments, and undertake government public welfare projects such as the construction and operation of urban infrastructure and supporting facilities, land development and consolidation, and resettlement housing construction in the region through entrusted construction.
Take the type of project construction as an example. Generally, this kind of infrastructure construction is public welfare or quasi-operational, and it is difficult to make a profit at the level of completing the project. The main source of income is the government's certain construction costs and financial subsidies. However, these projects have long cycle, large investment and slow payment, which often leads to the government's failure to pay the city investment company in time. The construction cost is always hung on the balance sheet of the city investment company in the form of accounts receivable, which leads to the instability of income and cash flow of these enterprises and the serious shortage of solvency and risk resistance.
3. The relationship between urban investment enterprises and local debts
Before local governments were allowed to issue local bonds, the urban investment and financing system was highly linked to the local financial budget system. After the introduction of local debt, the replacement accelerated. Under the "dual track system", the Phnom Penh attribute of the city investment has been strengthened. After the local debt replacement, the problems left over from history were completely cut. Logically speaking, city investment no longer benefits from local finance.
The pressure to quickly clean up local hidden debts and de-leverage has obviously increased, and the policy has gradually sought a balance between strength and rhythm.
There is no standard definition of implicit debt. Inference is based on the definition of explicit debt and whether the government directly assumes the responsibility of repayment. Implicit debt refers to the debt that the government has neither repayment responsibility nor insurance and rescue responsibility. However, once these debts are in crisis, the government will inevitably step in and take responsibility from the perspective of public interest. A more direct judgment is that the non-local debt formed after 20 15 may be implicit debt as long as the local government takes responsibility.
In the specific form of debt, loans and trust financing are more likely to have implicit debt. As far as financing platform is concerned, (other receivables-other payables) may also be a hidden source of debt.
Over the years, in order to meet the infrastructure financing needs of local governments, urban investment companies have been financing through platform credit, urban investment bonds, non-standard financing and other modes, and they have been heavily borrowed by local governments, resulting in a large number of local hidden debts. In 438+08, in 2065, it was about 5 1 trillion, and the average annual interest expenditure exceeded 3 trillion. The form of debt resolution is still grim.
Second, the occurrence and development of urban investment enterprises
City investment enterprises are rooted in China's unique investment and financing system, the governance structure of central and local governments and the corresponding financial system. City investment company is a special product born under this composite system. With the change of China's system, the development of urban investment industry also presents corresponding laws.
In the whole development process, urban investment enterprises originated from 1992. In 2008, infrastructure assumed the role of countercyclical adjustment. Under the favorable environment of the "4 trillion" policy, the whole industry showed rapid growth. Since 20 10, the supervision policy of city investment company has been gradually tightened. Although there are also easing policies as adjustments in the process, it may be difficult to encounter large easing policies in the next few years. In the new round of state-owned enterprise reform, due to strict comprehensive policy supervision, limited financing channels and weak hematopoietic capacity, transformation and development is still the main theme of city investment companies. According to its development process, it can be roughly divided into four stages.
The first stage (1992- 1997) started with the establishment of the first city investment enterprise, Shanghai city investment, which opened the road of exploration and practice for city investment enterprises.
In the second stage (1998-2008), represented by the "Wuhu model" of 1998, a large number of urban investment companies emerged, and a large number of financing and urban investment began.
In the third stage of 2009-20 14, marked by the "4 trillion" investment plan, the favorable policies made the city investment industry develop rapidly, and this "barbaric" growth also left hidden dangers for these platform companies in terms of assets and management.
The fourth stage (20 15)-Up to now, based on document No.43 at the end of 20 14 and the new budget law of 2015, the overall policy orientation is tightening, and document No.20181proposes measures to "fill the shortcomings".
By combing the evolution of urban investment bond policy since 2009, it presents a three-year cycle, specifically, two years is loose, and 1 year is tight.
Since 20 18 the State Council Standing Committee put forward the idea of "guiding financial institutions to ensure the reasonable financing demand of financing platforms according to the principle of marketization, and avoiding the fund failure and unfinished projects under construction", the urban investment policy has entered a new round of easing stage. At the same time, under the impact of the epidemic and the downward pressure of the economy, it will be a high probability event that policies are actively hedged and the policy environment for urban investment continues to be relaxed. Therefore, it is expected that the easing cycle of this round of urban investment policy will be longer.
Third, the transformation of urban investment enterprises.
The possible types of urban investment enterprises include liquidation cancellation, public welfare state-owned enterprises and market-oriented operation enterprises.
1. Liquidation cancelled
After the government financing function of city investment enterprises was banned, the pure financing city investment companies with financing function lost their meaning of existence and faced the fate of being cleaned up without transformation.
2. Resources are integrated and reorganized into public welfare state-owned enterprises.
City investment company can still become the main force of urban construction. Over the years, as the main body of investment and financing, city investment company has accumulated a lot of experience in infrastructure construction and public goods and services, and has a long-term close relationship with the government. It is still a better choice for urban construction after transformation. Therefore, for many city investment companies, transforming infrastructure into public welfare state-owned enterprises is a more likely direction and path.
Integrate regional city investment resources and set up a relatively large-scale group enterprise. For areas with scattered urban investment resources, it is likely to be transformed into relatively large-scale public welfare state-owned enterprises through mergers and acquisitions. In the choice of merger resources, city investment companies with similar businesses can be merged to give full play to the advantages of large-scale operation, just like the merger of Chongqing Water Group and Chongqing Water Conservancy Investment Company. After the transformation, the debts of the original enterprise will generally be inherited by the new company, and its business will be market-oriented. Generally, it will legally undertake the tasks of regional infrastructure construction and state-owned assets operation through BOT, PPP mode and government purchase.
3. Market-oriented enterprises
For financing platform companies with relevant professional qualifications, strong market competitiveness, large scale and standardized management, they can divest their government financing functions and transform into ordinary enterprises on the basis of properly handling existing debts. A typical case is the Chongqing urban investment system, which "changes one to eight and eight to five". In this process, there are two successful cases, Chongqing Communications and Tourism Investment Group Co., Ltd. and Chongqing Energy Investment Group, which were transformed from city investment companies into operating state-owned enterprises.
In the short term, the transformation of city investment company is "appearance" and has not changed the essence of city investment. Commercialization needs to produce assets with stable cash flow and get rid of the burden of government public welfare projects.
In the long run, the purpose of the transformation of the city investment company is to "reorganize", realize debt restructuring and resolve the local government debt crisis. Under the idea of "canceling a batch, integrating a batch and reforming a batch", asset transfer, integration and reorganization will be more frequent, which will have a great impact on the city investment company, and both the integrator and the integrated company will be full of challenges.
Author: Yin Haijiao Zhongtian Huapu Senior Consultant. Harbin Normal University, double bachelor, with two years of business management consulting experience. His professional consulting fields involve group management, organizational design, human resources and so on. , has rich practical experience in salary system design and performance system design. I have served water supply companies, resorts, electronic technology, city investment companies and many other enterprises. Strong analytical and problem-solving skills.