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| City Investment Bonds Issuing and Debt Replacement of Local Financing Platforms:A View of Bank Lines of Credit |
| SHEN Hongbo, HUA Linghao, ZHANG Jinqing
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| School of Economics, Fudan Univesity |
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Abstract Preventing local governments’ debt risk and encouraging local financing platforms’ market-oriented transformation are both cores of the Central Economic Working Conference in recent years. This paper focuses on the connective effects of bank lines of credit on platforms’ market-oriented transformation. We find that: (1) Bank lines of credit provide bond market with additional information. Higher credit lines can significantly improve credit ratings and reduce bonds’ financing costs. (2) Platforms with higher credit lines have higher propensity to carry out positive debt replacement, while the replacement scales are also higher. Moreover, the propensity of positive debt replacement is stronger with platforms’ market-oriented transforming progress. The policy implications of this paper are that platforms should enhance their profitability to elicit the positive influence of bank lines of credit. More importantly, fiscal and tax reform should be pushed to identify the boarder of government and market and enhance financial institution’s supervision, furthering the transform from bank loan dependent political bodies to market-oriented bodies.
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Received: 14 June 2018
Published: 22 January 2019
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