Research on the Problems and Countermeasures of China’s Urban Investment Bond Market

Abstract

Urban investment bonds are a series of debt financing instruments issued by local governments to alleviate financial pressures with local government financing platforms as the main body. The purpose of issuance is mainly to promote infrastructure construction or public welfare construction. For a long time, urban investment bonds have played an important role in making up for the capital gap of local governments, but there are many remaining issues. Under the background of central bank deleveraging and strict supervision, the risk of default of urban investment bonds were frequently exposed in 2020, breaking the previous rigid payment convention. Market awareness has triggered heated discussions in the market. This article takes the socially influential "Sixth Division SCP001" urban investment bond default incident as the starting point, analyzes and summarizes the problems and deep-seated reasons in the Chinese urban investment bond market from different perspectives. It also puts forward countermeasures and suggestions on how to resolve the risk of urban investment debt, which has a certain reference significance for our bank's urban investment debt-related business.