Traditional Investment and Financing Modes

Traditional investment and financing modes;; Due to the limitations of China's policies and regulations, there are two basic modes of investment and financing available for urban infrastructure: traditional government investment and financing modes and market investment and financing modes. (A) government investment and financing mode

Government investment and financing, refers to the government in order to achieve the goal of regulating economic activities, based on the government's credit as the basis for raising funds and use of financial activities, is an important part of the government's financial. Government investment and financing subject is authorized by the government, for the implementation of specific government construction projects, on behalf of the government to engage in investment and financing activities, with legal personality of the economic entity in the form of a wholly state-owned company formed in accordance with the Company Law.

The main body of government investment and financing based on the credit provided by the government, the main policy-based financing, supplemented by other means of financing. There are two main sources of funding channels: one is the government's financial contribution; the second is government debt financing.

The core of the government investment and financing model is: the construction project investment, construction, operation of the "trinity", all by the government or the government set up a wholly state-owned company, is a single state-owned economy in the urban infrastructure construction of the specific embodiment.

The biggest advantage of the government investment and financing model is that it can rely on the government's financial and good credit, fast financing, easy to operate, fast financing, reliability. Disadvantages are: First, the pressure on government finances, by the government's financial strength and can provide the degree of credit limitations, insufficient financing capacity; Second, is not conducive to the enterprise to diversify the main body of the shareholding reform, the implementation of corporate governance structure.

(2) Market-oriented investment and financing mode

Market-oriented investment and financing refers to the financial activities in which an enterprise raises funds and utilizes them for the purpose of obtaining profits, on the basis of corporate credit or project income, and by means of commercial financing such as commercial loans and the issuance of bonds and stocks. Non-state-owned corporate enterprises are the main body of market-oriented investment and financing.

The financing of the main market-oriented investment and financing is divided into enterprise credit financing and project financing. Enterprise credit financing is based on enterprise credit for a variety of financing activities; project financing is a joint venture to set up a joint-stock project company as the main body, under the support of the government, based on the project's own income for commercial financing activities. The main financing channels are: (1) equity financing such as private placement of promoters and issuance of shares; (2) issuance of corporate bonds based on corporate credit; (3) commercial loans from domestic commercial banks; (4) project financing, including BOT, BOOT, BOO, PPP, PPT, etc.; and (5) endogenous financing such as retained earnings (profits).

The core of the market-oriented investment and financing model lies in the fact that the investment, construction and operation of the construction project are divided into three parts, i.e., the existence of diversified investment and financing main bodies, the participation of many parties in the construction, the participation of many parties in the operation, and whoever contributes and whoever earns the profit, which is the specific embodiment of the diversified market-oriented ownership economy in the urban infrastructure construction.

The biggest advantage of market-oriented investment and financing is that it can attract more investors to participate in the construction of the project, reduce the dependence on government finance, and realize the diversification of investment and financing subjects. Disadvantages are: (1) financing is slow, the larger the amount of financing, the more complex the operating procedures; (2) enterprise credit financing is limited by the degree of enterprise credit, financing capacity is uncertain; project financing is often for large-scale construction projects, the need for a large number of government policy support to ensure that there are enough stable cash flow, the formation of the corresponding financing capacity; (3) the reliability of the relatively poor, the operation of the link is more, any one of the Problems in the link will lead to the failure of the whole financing program.

It is worth pointing out that, in view of the shortcomings and deficiencies of each of the two investment and financing modes, the combination of the two, complement each other's strengths and weaknesses, to play their respective advantages. Internationally, there is a new investment and financing model that combines the advantages of these two - the PPP model.

The PPP model refers to the cooperative arrangement between the government and enterprises for the provision of public **** infrastructure, public **** product services, etc. This arrangement usually achieves the most reasonable cost control under the circumstances of risk **** enjoyment and shared financing.The PPP approach has been increasingly widely utilized in the field of global public **** infrastructure and other public **** products and services, and the adoption of the PPP approach is not only a breakthrough in the investment structure, but also a breakthrough in the investment structure, as well as a breakthrough in the investment structure. is a breakthrough in the investment structure, more importantly, this kind of compared with our current financing methods, can bring other benefits, such as: the introduction of new expertise, improve the quality or level of service, access to project innovation, reduce project costs and so on. Therefore, governments are now widely adopting the PPP model for infrastructure construction in combination with their own national conditions.