By Chen Feng, Research Institute of Public Administration and Human Resources, DRC

Research Report, No.402, 2021 (Total 6467) 2021-12-20

Abstract: In recent years, with the advancement of urbanization and deeper economic and financial institutional reform, the renovation of financing mechanism in China’s urban areas has witnessed more diversified channels and models backed up by government, market and social forces. Meanwhile, the financing mechanism is facing some problems such as mismatch of fiscal resources and administrative responsibilities for local governments, imbalance between financing demand and public fiscal support, inadequate role played by financing incentives and restrictions and limited financial services and products. This paper argues that the reform and innovation of financing mechanism in China’s urban areas need to focus on warding off financial risks, controlling leverage ratio, going further in putting idle funds to work, increasing effective supply, guiding reasonable pricing of assets and ensuring the performance of drivers for long-term development of the industry. According to this paper, we need to confer more financial resources and administrative responsibilities to local governments, strengthen the release of dividends for urban financing renovation and the independent financing mechanism, improve financing incentives and restrictions for urban financing renovation, and reinforce innovation of market-oriented financial tools and services.                                   

Keywords: urban financial renovation, financing mechanism, financial innovation, fiscal and taxation support