Local Governments and LGFVs:Integrating Development and Security
Debt financing by local governments with the help of f Local Government Financing Vehicles(LGFVs)is an important way to break through the traditional fiscal system and financial constraints in order to mobilize construction funds,but it is prone to accumulating fiscal and financial risks.In order to integrate development and safety,this paper tries to reconstruct the relationship between local governments and LGFVs.First of all,the wandering state of LGFVs is portrayed from the micro level,and LGFVs in 2019-2021 are tracked and defined from an economic perspective,and the number of LGFVs has a slight decreasing trend in general.The trend characteristics of interest-bearing debt of LGFVs highlight the effects of the financial sector's"borrowing new loans to repay old"policy,the bond support policy during the COVID-19,and the implicit debt management policy.Further research finds that the structured issuance of municipal bonds has pushed up financing costs and nested multiple layers of leverage,which is prone to risk exposure and aggregation;and the targeted financing model of non-standard debt not only further pushes up financing costs,but also tends to embed social risks into fiscal risks.Then,the entangled relationship between local governments and LGFVs is deeply elaborated,including tool dependence,risk accumulation and transformation challenges.The breakthrough lies in how to eliminate the tool dependence of local governments on LGFVs in the process of investment and financing.Finally,around the breakthrough,attempts are made to promote the market-oriented transformation of LGFVs in development through three types of standardized cooperation,effective separation of government credit and corporate credit,and competition mechanism.
Local GovernmentsLGFVsMarket-Oriented Transformation
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