This article is from the WeChat public account: Economic Observer (eeo-com-cn) , author: Deng Junfeng, title figure from: vision China

In recent years, governments at all levels have the same doubt: Regardless of the size of the private enterprises, what kind of difficulties they encounter, the first thing that comes to mind is government assistance, and they do not go through market-oriented channels to find solutions, especially when it comes to funding shortages. There is a situation where enterprises are overly reliant on the government for bail-outs.

The risks faced by enterprises in production and operation include natural risks, economic risks, political risks, and technical risks. Among them, political risks are common in international and domestic politics, policy changes, daily administrative approvals, and penalties, which can only be resolved by the government. Economic risks are mainly caused by the uncertainty of various economic factors related to the production and operation activities of enterprises. However, funding problems account for the largest proportion, including equity pledges, inability to repay loans due to real estate mortgages, plant equipment investment or new technology research and development that require large government subsidies.

If the production and operation of the company is in good condition or the industry is at a high-speed development stage, government bailouts are often not needed, and financing needs can often get help from market channels. (such as a unicorn enterprise) .

Enterprises that are overly reliant on government bail-outs are often those with problems in production and operation or technology-based companies in the early stages. If there is a problem in the production and operation of the enterprise, or even in a deteriorating stage, the probability is that it will have a very high discount. (Quality) Financing is extremely difficult or can no longer be financed through social channels, and can only be pinned on government assistance.

So instead of not financing from social channels, companies ca n’t raise funds from social channels.

Reason for enterprises not being able to raise funds from social channels:

1. Social capital is profit-seeking. If the overall economic situation is poor, we often support the strong but not the weak, and support the prosperity and decline.

2. Financial institutions conduct due diligence on companies that require funds. If they find that the company is in a downward path and the cash flow is insufficient, financial institutions often do not grant loans to companies based on their own assessment systems and indicators to reduce overdue rates and bad Rate and bad debt rate.

3. Entrepreneurs, especially the major shareholders of listed companies, are willing to pass equity and fixed assets through ( Quality) cashing into the bag in the form of a pledge, if the business is in a bad state, it will break and break, and let the bankruptcy occur (such as LeTV) span>.

Reason for companies requesting government relief:

1. The efficiency of return from market financing, financing cost, expense interest, etc. are high, and there are risks of short time and withdrawal of capital; the cost of government bailout funds is low, and long-term stability.

2. Social capital is more professional, companies, projects, and industries are more transparent, while government finance is not professional enough, and information asymmetry exists. Enterprises often use this information asymmetry to mislead the government and avoid reality. Make a bailout request.

3. If the company has difficulties in production and operation, there are labor disputes or debt disputes, and social stability and other factors are involved, often the government needs to take the lead to resolve them.

4. In addition to financial support, companies are asking for government bail-outs. They also use government credibility to endorse and coordinate social relations and social resources.

Businesses rely too much on the government.

1. Must help

The government’s rescue and assistance to enterprises is an important measure to prevent and mitigate financial risks and serve the real economy. It is also a major decision-making deployment of the Party Central Committee and the State Council.

2. Who can I help?

Bail-off enterprises must adhere to the principles of marketization and legalization. The first is that the company must be a high-quality company in the real economy, including high-tech companies, strategic emerging industries, and traditional traditional industries; the second is that the company’s production and operation are basically good and it has good development prospects; Records of violations of laws and regulations and major dishonesty; the fourth is to adhere to one enterprise and one policy, and assist in accordance with laws and regulations.

3. How can I help?

First, bail out through non-financial means. The government gives full play to the function of coordinating social relations and social resources, such as the establishment of an enterprise rescue work group (or enterprise service center) To deal with outstanding and concentrated problems, formulate communication and coordination work with relevant departments and financial institutions within the scope of government authority.

Second, we will use the means of funds to rescue the people. For example, if the government’s credibility is used to endorse an enterprise, for innovative or growth companies, the government-owned company’s platform can appropriately participate in shares, optimize the structure of corporate shareholders, improve corporate credit ratings, and enhance external financing capabilities; “text-remarks” label = “Remarks”> (bonds) , the government and financial institutions contribute a certain percentage of capital to leverage social capital, which can effectively reduce the cost of financing companies directly from the market.

The third is to find a balance between government and enterprises. The main purpose of the government’s bail-out is to maintain the stability of the financial market, avoid systemic risks, and maintain social stability, and prevent mass incidents. The main purpose of enterprises is to ensure normal production and operation, stable cash inflows, and bankruptcy liquidation. The government can find a balance point for the main purposes of the two sides. “One enterprise, one policy” can use limited government resources to bail out, which can not only achieve the purpose of maintaining stability, but also maintain the minimum operation of the enterprise.

Fourth is to guide and promote diversified financing such as financing leasing, supply chain finance and warehouse receipt finance. Such as financial lease, internationally, it is the second largest financing method after bank loans. Plant (equipment) lease is a special financial Services play an important role in corporate financing. Financial institutions only provide working capital for enterprises.When investing heavily in fixed assets, financial leasing can meet its needs.

This article is from the WeChat public account: Economic Observer (eeo-com-cn) , author: Deng Junfeng (Department of local government economic staff)