Since November, during the period of list division and review policy reshaping, many urban investment entities have stated in their prospectuses that they are "market-oriented business entities", which has attracted market attention during the period when the market is concerned about the division of the nature of the entity.
Among the 13 platforms involved in the expression of "market-oriented business entities", from the perspective of the administrative levelThere are mainly 10 municipal-level platforms, in addition, including 2 district and county-level platforms and 1 national-level park platform.
Judging by the main rating,All of them are AA+ and above, of which there are 7 AA+ entities and 6 AAA entities, and the implied ratings are mainly AA (2) and above, of which there are 4 AA+ and AA and 5 AA (2).
From a regional point of view,It is mainly distributed in Jiangsu, Guangdong, Fujian, Shandong, Hunan, Zhejiang, Hebei and other provinces, of which there are 3 in Fujian and Shandong, 2 in Zhejiang, and 1 in each of the other provinces.
Judging from the situation of the stock of credit bonds,The scale of the stock credit bonds of 5 entities exceeds 30 billion yuan, the scale of 1 entity is in the range of 20 billion to 30 billion yuan, the scale of 3 entities is in the range of 10 billion to 20 billion yuan, and the scale of the remaining entities is less than 10 billion yuan. From the perspective of valuation, the valuation of credit bonds on most platforms is basically at 29%-3.3% range, and the public offering valuation is more than 32%, and the public offering spread is basically below 80bp.
From the point of view of the scope of business,Among the business composition of many entities, there are public welfare projects involving municipal engineering construction, regional development and construction, port operation, infrastructure investment and construction operation, shantytown resettlement housing construction, land development and consolidation, as well as quasi-public welfare projects such as heating, water supply, gas**, and transportation.
It can be seen that most of the above-mentioned "market-oriented operation" entities are responsible for the investment, construction or operation of public welfare or quasi-public welfare projects in the region, and are important infrastructure construction and public utilities operators in the region, that is, they still have a considerable proportion of the first current business. What do you think of this?Let's start with the transformation of financing platforms and the classification of state-owned enterprises. On the transformation of financing platforms and the classification of state-owned enterprisesFirst of all, the definition of a financing platform is elaborated:1. On the transformation of financing platformsIn 2010, Guo Fa [2010] No. 19 made the first definition of financing platform:"An economic entity established by the local government and its departments and agencies through financial appropriations or injection of assets such as land and equity, undertaking the financing function of investment projects and having independent legal personality". Among them, the attributes of local state-owned enterprises are highlighted, and the two attributes of undertaking the financing function of first-class investment projects. Subsequently, Cai Shui [2010] No. 412 further clarified the financing platform companies:"It shall be established by the local ** and its departments and institutions, affiliated institutions, etc., through financial appropriations or injection of assets such as land and equityIt has the function of investment and financing of public welfare projectsand economic entities with independent corporate legal personality, including all kinds of comprehensive investment companies and industry-based investment companies". The definition of Circular 412 continues the expression of Circular 19, but the expression "public welfare project" is added to the ** investment project mentioned in Circular 19, which makes the concept clearer. And in the "Notice on Further Regulating the Issuance of Bonds by Local Investment and Financing Platform Companies" issued on November 20, 2010 (Fa Gai Ban Cai Jin [2010] No. 2881)."Local investment and financing platform company refers to an economic entity established by the local government and its departments and institutions through financial appropriation or injection of land, equity and other assets, engaged in the financing, investment, construction and operation of public welfare or quasi-public welfare projects designated or entrusted by the local government, and has independent legal personality." That is, the "public welfare projects" in Circular 412 will be further expanded to "public welfare or quasi-public welfare projects". Subsequently, in May 2015, the General Office of ** issued the Notice on Opinions on Properly Resolving the Follow-up Financing Issues of Projects under Construction of Local ** Financing Platform Companies (Guo Ban Fa [2015] No. 40), which completely reaffirmed the expression of Circular No. 19 of 2010 in the definition of financing platform companies:"A financing platform company refers to a company established by the local government and its departments and institutions through financial appropriations or injection of assets such as land and equityUndertake the financing function of ** investment projectsand an economic entity with an independent legal personality". In addition, combined with the policy's expression of ** debt: "debt repayment funds ** provide direct or indirect guarantees for financial funds, or ** (fully funded public institutions)". Therefore, the earliest definition of a financing platform company can refer to the following points:(1) It shall be established by the local government and its departments and institutions through financial appropriation or injection of land, equity and other assets, and shall first be a local state-owned enterprise (excluding central enterprises, private enterprises, Sino-foreign joint ventures, collective enterprises, etc.);(2) The debt repayment funds of the corresponding debts are directly or indirectly guaranteed by the financial funds, or the financial funds(3) Undertake the financing function of ** investment projects, public welfare or quasi-public welfare projects (further defined). However, after the issuance of the "Opinions on Strengthening the Management of Local Debts" (Document No. 43), the positioning of financing platform companies has changed in the context of policyOpinions on Strengthening the Management of Local Debts (Document No. 43) dated October 2, 2014It is further clarified that the financing function of the financing platform company shall be divested, and the financing platform company shall not add new debts, and the document shall clarify the responsibilities of the enterprise and the enterprise, and shall not borrow through the enterprise, and the debts of the enterprise shall not be pushed to the first for repayment, so as to effectively ensure that whoever borrows and who repays the debt, and bears the risk. On December 23, 2017, the Ministry of Finance's "Report on Resolutely Stopping Local ** Illegal Debt Borrowing and Curbing the Increase of Hidden Debts" also clarified:Promote the market-oriented transformation of financing platform companies by category, properly handle the debts and assets of financing platform companies, divest the financing functions of financing platform companies, and support state-owned enterprises after transformation to undertake public welfare projects in accordance with laws and regulations. Note: 1) For shell platforms that mainly undertake public welfare projects and rely on fiscal funds to repay debts, they shall be liquidated and cancelled in accordance with the law on the basis of properly disposing of debts, assets and personnel;2) For composite platforms that have both first-class financing and public welfare project construction and operation, their financing functions should be divested, and similar businesses should be integrated through mergers and acquisitions, so as to promote the transformation of the financing platform into a public welfare state-owned enterprise with market-oriented operation in the field of public welfare undertakings;3) For large-scale market-based financing platforms with relevant professional qualifications, on the basis of properly handling existing debts, support their transformation into commercial state-owned enterprises. 4) For financing platforms with different types of financing functions, it is also necessary to carry out market-oriented transformation in accordance with the above principlesIt can be seen that as early as 2014, the policy side has been emphasizing the divestment of the financing platform's financing function, and promoting its market-oriented transformation by classification. Here, what is clear is the link between the place** and the financing platform. 2. Classified management of state-owned enterprisesIn fact, with the development of the national economy, the reform of state-owned enterprises and the deepening of the market-oriented transformation of urban investment, refer to the functional classification and definition of local state-owned enterprises in various localitiesIt helps us to understand the nature of the enterprise and the potential support of the local government, including a better grasp of the substance over form principle when analyzing the fundamentals of the enterprise and the impact of related policies. According to the "Guiding Opinions of the Communist Party of China on Deepening the Reform of State-owned Enterprises" issued on August 24, 2015:"According to the strategic positioning and development goals of state-owned capital, combined with the role, status quo and development needs of different state-owned enterprises in economic and social developmentDivide state-owned enterprises into commercial and public welfare".Among them, for commercial state-owned enterprises,In accordance with the requirements of marketization, the implementation of commercial operation, with the main goal of enhancing the vitality of the state-owned economy, enlarging the function of state-owned capital, and realizing the preservation and appreciation of state-owned assets, independently carry out production and operation activities in accordance with the law, and achieve the survival of the fittest, orderly advance and retreat. For public welfare state-owned enterprisesWith the main goal of ensuring people's livelihood, serving the society, and providing public products and services, market mechanisms are introduced to improve the efficiency and capacity of public services. Focus on the assessment of its cost control, product and service quality, operational efficiency and guarantee ability, according to the different characteristics of the enterprise to distinguish the assessment of business performance indicators and state-owned assets to maintain and increase the value of the situation, the assessment should introduce social evaluation. Subsequently, on December 29, 2015, the State-owned Assets Supervision and Administration Commission (SASAC) issued the "Guiding Opinions on the Definition and Classification of the Functions of State-owned Enterprises" Guo Zi Fa Research [2015] No. 170, which correspondingly clarified: "Based on the strategic positioning and development goals of state-owned capital, combined with the role, status quo and needs of different state-owned enterprises in economic and social development, according to the main business and core business scopeState-owned enterprises are defined as commercial and public welfareWith the main objectives of enhancing the vitality of the state-owned economy, enlarging the function of state-owned capital, and maintaining and increasing the value of state-owned assets, commercial state-owned enterprises carry out commercial operations in accordance with the requirements of marketization, independently carry out production and operation activities in accordance with the law, and achieve survival of the fittest, orderly advance and retreat. Among them, the main business is in the important industries and key areas related to the lifeline of the national economy, and the commercial state-owned enterprises that mainly undertake major special tasks should focus on the development of forward-looking strategic industries with the goal of ensuring the operation of the national economy, so as to realize the organic unity of economic, social and security benefits. Public welfare state-owned enterprises have the main goal of ensuring people's livelihood, serving the society, and providing public products and services, and the necessary products or services can be regulated by the publicIt is necessary to actively introduce market mechanisms and continuously improve the efficiency and capacity of public services. Based on the above documents, the biggest difference between public welfare and commercial is whether it can be market-oriented and self-operating, survival of the fittest, and orderly advance and retreat. Public welfare enterprises are more in line with the market's general understanding of urban investment, and they have also become an effective way to screen and define urban investment platforms. 
Specifically, each province has introduced a local state-owned enterprise reform plan to classify and manage state-owned enterprises in the region, and under the guidance of the first policy document, each province will show certain differences according to its own characteristics(1) Each local government designates the classification policy of local state-owned enterprises according to its own economic characteristics, and some provinces have divided it into three categories: competition, function and public service, among which Tianjin's "Implementation Opinions on Further Deepening the Reform of State-owned Assets and State-owned Enterprises":Competitive Enterprises:It is mainly involved in manufacturing, trade and logistics, real estate, finance and other fields. This kind of enterprise is market-oriented, in order to maximize economic benefits, play a backbone role in the city's economic development, and become the vanguard of the industry as the goal, taking into account social benefits. Focus on business performance indicators and the ability to sustain the development of the main business. Public Service Enterprises:It is mainly involved in energy, transportation, water and other fields. This type of enterprise mainly provides public products and services to ensure the normal operation and stability of the city, protect the people's livelihood, and maximize social benefits. Focus on safety, product quality, cost control and service quality. Functional Enterprises:It mainly involves various investment and financing platforms, capital operation platforms and other fields. This kind of enterprise aims to complete the most important special tasks, serve the strategic tasks and the real economy, and pursue the comprehensive effect of the economy and society. Focus on financing capacity and risk control. In addition, some provinces have divided competition and public welfare, or competition and function, in Gansu Province's "Implementation Opinions on Deepening the Reform of Local State-owned Enterprises":Business:In accordance with the requirements of marketization, the implementation of commercial operation, with the main goal of enhancing the vitality of the state-owned economy and realizing the appreciation and preservation of state-owned assets, independently carry out business activities in accordance with the law, and achieve the survival of the fittest, orderly advance and retreat;Public welfare:With the main goal of ensuring people's livelihood, serving the society, and providing public products and services, market mechanisms are introduced to improve the efficiency and capacity of public services. 
This involves a question, what is the difference between public service and functional enterprises?Is there a correlation with the definition of urban investment platforms?In this regard, on the one hand, we can refer to the Shaanxi Provincial State-owned Assets Supervision and Administration Commission's "Opinions on the Implementation of Classified Management of Provincial Enterprises" of Shaanxi Province(1) Public service enterprises:It is mainly an enterprise that undertakes the task of improving people's livelihood, serving the society, and ensuring the normal operation of production and life of the public, focusing on providing public service products, and paying equal attention to social and economic benefits. This includes utilities that provide utilities such as water, electricity, gas, heat**, public transportation, and other public goods or services. (2) Functional enterprisesIndustry:Enterprises that mainly undertake specific tasks, as well as carry out special business within a certain range according to relevant regulations and requirements, in order to complete the specific policy objectives and achieve social benefits as the core, taking into account economic benefits. Including major project construction and specific industry investment and development enterprises. (3) Competitive enterprises:Market-oriented, with the main goal of maximizing the economic benefits of the enterprise, and at the same time focusing on social benefits, its survival and development completely depend on the market competition of the enterprise. Including enterprises in energy and chemical industry, non-ferrous metallurgy, equipment manufacturing and other industries. On the other hand, we can focus on the Inner Mongolia Autonomous Region's "Implementation Opinions on Deepening the Reform of State-owned Assets and State-owned Enterprises in the Autonomous Region". As early as December 2014, the autonomous region divided state-owned enterprises into specific functional categories and commercial competition categories。In 2015, the Autonomous Region issued the "Implementation Opinions", which further subdivided the classified management of state-owned enterprises:It is divided into public welfare, specific functions and commercial competition, of which:(1) Public welfare state-owned enterprisesIt is mainly distributed in industries and fields such as water supply, gas supply, heat supply, public transportation, important commodities and strategic material reserves. (2) State-owned enterprises with specific functionsIt is mainly distributed in important industries and key fields such as culture, military industry, power grid, railway, oil and gas, telecommunications, postal services, tobacco, major infrastructure construction, development of important mineral resources, and basic common technology research, as well as various platform companies. (3) Commercial competitive state-owned enterprisesIt is mainly distributed in fully competitive industries and fields. In addition, we can further look at the specific example, the classified list of state-owned enterprises in Guangzhou as an example:(1) 4 functional enterprises:Guangzhou Port Group, Guangzhou State-owned Assets Development Holdings, Guangzhou Urban Construction Investment Group, Guangzhou Horse Racing Entertainment Corporation. (2) 5 public welfare enterprises:Guangzhou Metro Group***Guangzhou Public Transport Group***Guangzhou Water Investment Group***Guangzhou Transportation Investment Group***Guangzhou Environmental Protection Investment Group***(3) 15 competitive enterprises:Guangzhou Automobile Group Co., Ltd.*** Guangzhou Yuexiu Group Co., Ltd.*** Guangzhou Radio Group*** Guangzhou Light Industry Industry and Trade Group*** Guangzhou Intelligent Equipment Industry Group Co., Ltd.*** Guangzhou Industrial Investment Holding Group*** Guangzhou Construction Group*** Guangzhou Pharmaceutical Group*** Guangzhou Commerce and Trade Investment Holding Group*** Guangzhou Zhujiang Industrial Group*** Guangzhou Lingnan International Enterprise Group*** Guangzhou Restaurant Group Co., Ltd.*** Guangzhou Pearl River Piano Group Co., Ltd.*** Guangzhou Development Group Co., Ltd.*** Guangzhou Pearl River Beer Co., Ltd. ***In the summary of the above discussion, it can be seen that in the context of continuously promoting the classification transformation of financing platform companies, the principle of marketization is the first principle, whether it is to undertake public welfare projects, quasi-public welfare projects or commercial projects. Considering the classified management of state-owned enterprises since 2015, under the current state-owned enterprise management system, after the integration of state-owned enterprises since 2018, the attribute division of relevant enterprises under the ** local government actually has a large logical framework, and there are also relevant definitions and clarifications. Further implement local responsibilitiesAs for the market's recent concerns, we believe that logically speaking, the key is to further strengthen the number of platforms and financing management, implement the division of powers and responsibilities of various departments, and further strengthen the management of local territorial responsibilities.
Further, how to understand the expression of "market-oriented business entity" mentioned in the prospectus of some issuers' bond issuance, and whether it will affect pricing?We believe that the principle of substance over form is the first principle, and the specific business attributes of the relevant entity, the functions it undertakes in the region to which it belongs, as well as the fundamentals of the region where it is originally located and the fundamentals of the enterprise are the fundamental premise of our judgment, and it is also the anchor of market pricing. Correspondingly, the classification of some local ** state-owned enterprises is something we can refer to:
Also, is the pricing affected?Judging from the deviation of the primary issuance and the secondary transaction,With the successive implementation of the "package of bonds", market sentiment has been boosted, and the deviation from the valuation of the primary issuance of urban investment bonds has narrowed as a whole, and the secondary transactions are mostly lower than the valuation. Companies involved in the expression "market-oriented business entities" do not have a significant distinction in terms of their performance in the primary and secondary markets. 