Analysis of financing highway construction funds

Highway as an important Transportation infrastructure, is accompanied by economic Development of human society arising from the 1988 China's first expressway of Shanghai-Jiading Expressway opened to traffic after 20 years of efforts, as of June 2009 China's high-speed mileage has reached 75,000 kilometers ranked world No. 2 Highway construction costs are very high, technical difficulties, require substantial capital investment, a huge investment for highway construction financing is very difficult in Western countries, the use of market economic way of highway investment and financing has become customary, stocks, bonds, loans and other financing methods in the theory and practice are more mature, a number of sophisticated financial instruments, such as the BOT, ABS financing model, also used for highway funds raised on, while China's investment and financing channels for relatively simple, except a small amount of government investment, most rely on bank loans.


First, the investment of state funds

Government investment in highway construction is the country's infrastructure, with government and public welfare, which determines the government must invest in construction funds, the highway belongs to the government allocation of resources should be determined by the scope of Highway with a large investment, construction period long, serving the whole society, etc., is a natural monopoly quasi-public goods. In theory, the majority of highway construction funds should come from the national investment, but because of huge demand for the national highway construction funds, the central and local financial resources are limited, not possible to complete the project as a public highway by the government to invest in building materials, the current financing structure of China's highway investment in the central government and provincial and municipal local input about 6% to 7%, commercial banks and policy banks loans accounted for 60% to 70%, other 20%, compared with government-backed companies listed on the stock and long-term corporate bond funds, and foreign and private capital investment.


Second, financial institutions, credit funds

Bank lending has long been an important source of funding highway construction, bank credit funds in China's highway construction funds occupy an important position in the chain, according to 2007 Department of Transportation highway investment amount and source of funds to complete the statistics, first half of 2007 China's total annual funding of highway construction 126.6 billion yuan, of which bank loans of 821 billion, the central government 63.6 billion yuan of domestic loans, foreign bank loans to $ 6.2 billion in loans to local governments $ 12.3 billion, total bank borrowing facilities investment 64.8 %.

(1) Domestic bank loans
Countries as a basis for the highway construction industry to give key support to increase the size of credit. Banks control the risk from their own point of view, increase the income stability of the highway project inputs of bank loans has actually become the most important and most highway construction important source of funds of bank into the high road construction loans to a large extent alleviate the serious shortage of funds in highway construction conflicts, more than half of China's highway construction funds rely on bank loans, bank term loans are usually more short, while the highway construction for a long time, the early operation of the highway, less the amount of vehicle traffic, highway operating companies do not have sufficient funds to debt service, which would give companies a heavy debt burden, triggered the financial crisis now Commercial banks provide loans for very contradictory to the highway the one hand, higher authorities in order to complete the task, taking into account the specific circumstances of the highway stable income, the bank is willing to provide loans to the highway, on the other hand, can not schedule as many highway Bank of principal and interest payments, which will inevitably bring more to the bank's financial risk.

(B) International financial institutions
International financial organizations, foreign governments, foreign banks, foreign financial institutions to provide loans to constitute state debt, countries not only need to assume debt obligations, and to bear all exchange rate risk, so our government debt is very prudent for the World Bank is Currently the world's most influential international financial organizations, one of China from the mid-1980s, a World Bank loan financing of highway construction funds in 1993 the Chinese State Council approved the first World Bank loan to build the inter-provincial, city Tianjin-Tanggu Expressway Project (Beijing-Tianjin-Tanggu) highway traffic. Asian Development Bank, foreign government loans, foreign bank loans for the Development of highway played an important role.


Third, make full use of domestic private capital

(A) highway construction bonds issued
Highway bonds have a certain economic base in our present type of highway construction bonds, including bonds, the central highway, provincial highway bonds and corporate bonds, interest rates according to rate of return on highway projects and economic Development reasonable. On the highway enterprises, bonds help to optimize the financial structure, improve the corporate governance structure, reasonable tax avoidance, to play the role of financial leverage and therefore more suitable for corporate bond financing is the financing. highway bond issue is to obtain the advantages of the use of funds than borrowing long term, generally more than three years, a large amount of one-time funding to facilitate corporate financing.

For investors, China's savings has been the family's main investment, along with rapid economic Development, private capital to broaden the investment channels more and more pressing demands. Highway bonds as government bonds and has a high degree of credibility corporate bonds, in terms of risk minimization or revenue stability from the perspective of private funds are an ideal choice objects to buy bonds highway industry has the following characteristics: First, stable investment income, investment income is generally higher than bond Bank interest rates cut is relatively stable, not because of the highway industry, business conditions and volatility. Second, the investment is flexible, easy to operate. the amount of private funds to purchase bonds can vary according to their strength, the number of purchase decisions, while through banks and other financial institutions to issue bonds to take advantage of its more complete platform and operating system, due to the purchase and payment bonds to provide good service. Third, cash is easy. You can buy bonds, mortgages, etc. for cash, in terms of cash relative to the stock easier, more fluid, the highway bond funds is the shortage of private investors get a good sale in cash or collateral. Links to free download http://www . hi138.com (b) the direct absorption of private capital investment
The so-called direct absorption of private capital investment, through direct investment, stock, etc. to raise funds this way the need to transfer some or all of the highway right to operate scheduled direct financing without payment of principal and interest only payment based on the operations of the highway bonuses and dividends to investors, businesses can keep adequate highway development fund under the premise of autonomy in accordance with relevant laws and regulations determine the form and distribution of the amount allocated to provide for the future development of a vast space. to take advantage of this model is that investors in the early stage of the project into, investors can be more detailed understanding of the master project situation, to facilitate control of the project investment and financing.

Because investors can participate in direct investment major decisions highway development and management, profit-driven reasons for investors to make scientific enterprise the right to request the highway, reasonable and fair decision-making, so that can protect the interests of investors , and it helps the future development of the highway for domestic and foreign investors, China's reform and opening up the economy and good prospects for development highway is very attractive, profit-driven capital to urge them to find a more suitable investment areas The highway is one of the industry, allows investors to share the direct investment in the rapid economic development to the highway industry to bring the excess profits. In general, the highway to give investors more investment, more stable earnings opportunity to secure their funds can be given some degree of protection, which has a strong attraction for investors in recent years, due to China's rapid economic development, many foreign direct investment in the highway promising, progress in this area larger.

(C) the issue of stock market financing
With the rapid development of capital markets, issuing stock market financing has become an effective way of corporate finance highway. Expressway shareholding in the country are implemented quickly, private placement and public offering of stock, so that private capital into the industry with a new highway channel. to the end of 2008, the National Highway Class A shares of listed companies has reached 20, the highway through the direct financing channels for securities market has gradually matured for private funds, the stock market through the purchase of shares issued by the highway industry direct investment in the highway, can get access to the highway industry an effective way, is a more scientific and reasonable investment for the Government, through the shareholding can raise highway construction funds, to attract more money into the highway industry The purpose for the highway business, through the shareholding in the equity financing will help to change the existing enterprise management mechanism, encourage enterprises to adopt more market-oriented, scientific management to improve efficiency.

In the case of the stock market has become more standardized through direct investment in the highway industry, stock market, investors can better protect the interests of highway industry earnings stability, growth, and issue of shares by the shareholders of the funds raised are invested in company during the repayment of the principal does not exist, but an annual amount not isolated from the operation of a fixed dividend, which makes the shareholders may benefit from economic growth benefits to the highway industry, while the relevant laws and regulations norms and securities regulatory regime can effectively protect the legitimate interests of investors.


Fourth, the BOT project financing

BOT is the English build - operate - transfer the abbreviation of build - operate - transfer of abbreviations, mainly for large-scale infrastructure construction and it is the government signed concession contracts with the project company, the project's financing, design, construction project project In agreement with the company during the operation, maintenance of the facility, through user fees or service charges to recover the investment and the right to obtain a reasonable profit, after the expiry of the concession project free of charge transferred to the local government. Specifically, the construction of BOT highway refers to the government (through contract) awarded the project investors exclusive license for a certain period, permits the construction and operation of its financing road construction projects, and to allow its services through fees or operating along the return on investment and profit. expiry of the concession period When the road infrastructure project free of charge transferred to the Government. the BOT project financing all of the funds needed by foreign investors or domestic investors by financing solutions in China, many highways are in this way can the construction of , 2004, China's first expressway BOT project operations, Beijing introduced a highway BOT financing model is .2005, Guangxi and foreign construction of BOT highway addition, Jingzhou, Hubei Xiangyang to highway, Wen County, Henan Jiaozuo to high-speed road, Xiangtan, Hunan Changsha-West Highway, Chengdu-Chongqing Expressway are all created in this way.

BOT approach will help spread the risk of the government, the authorization expires, the government can also obtain the effective operation of assets. Take BOT investment for investors, due to strong government support, combined with the investment income of more highways stable, with the social and economic development will be constantly growing, which can effectively reduce the investment risk, investment return and has a good guarantee because of the long-term planned economy to the legal environment, imperfect, and the lack of professionals engaged in BOT projects and other reasons, China's highways on a BOT basis based franchise is still in the experimental stage, in full swing still need to do a lot of work.

Financing needs of large highway construction, construction for a long time, the choice of financing right or not, the construction unit of the country or a great impact, therefore, the relevant departments in making investment and financing decisions must be based on their own, considering the outside world financing environment, scientific proof, and consider, choose the best options to achieve the best economic and social benefits, to maintain the sound development of highway construction.

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