Anhui Investment Group: innovating in the financing mode to boost the renovation of urban shantytowns

Company profile
 
Anhui Investment Group Holding Co., Ltd. (hereinafter shortened as Anhui Investment Group) was approved by the People’s Government of Anhui Province in June 1998 and founded by the merger of Anhui Construction Investment Company, Anhui Agriculture Investment Company and Anhui Railway Construction Investment Company. In June 2011 and October 2014, it was merged with Shanghai Yu’an Investment Group Co., Ltd. and Shenzhen Anhui Industrial Cooperation successively.
 
Anhui Investment Group is the first state-owned capital investment operation company pilot enterprise determined by Anhui provincial party committee and provincial government. It undertakes the important strategic tasks of guaranteeing key infrastructure construction and leading industrial upgrading. The Group has its headquarters in Hefei, with a registered capital of 30 billion yuan. By the end of 2016, its total assets has reached 118.7 billion yuan and had 14 wholly-owned subsidiaries, 15 holding subsidiaries and 80 shareholding secondary enterprises, which are mainly located in Anhui, Shanghai and Shenzhen.
 
Challenges
 
Pushing forward the renovation of urban shantytowns is a significant measure to guarantee and improve people’s livelihood, which can help speed up the resolution of housing difficulties for low-income residents. However, the key problem for shantytown renovation is the severe lack of start-up capitals, which is especially true for the central underdeveloped areas like Anhui. Therefore, innovating working mechanism and financing mode and making steady and orderly efforts to promote shantytown renovation in Anhui is an opportunity for Anhui Investment Group to transform into a comprehensive urban construction solution provider.
 
Solutions
 
To effectively solve the bottleneck problem of capital guarantee for shantytown renovation in Anhui province, Anhui Investment Group established Anhui Construction Investment Co., Ltd. (hereinafter shortened as Construction Investment Corporation), a wholly-owned subsidiary, in 2014, and takes it as a provincial financing platform for shantytown renovation. It adopts the mode of “unified rating, unified credit and unified loan and repayment” to deal with unified loan and repayment for shantytown renovation of 58 cities and counties in Anhui, except for Hefei, in Development Bank.
 
Innovating in working mechanism to accelerate the financing process of shantytown renovation. To optimize the loan management process and push forward shantytown renovation financing work, Construction Investment Corporation has taken a series of measures, including firstly building the cooperation mechanism between governments, banks and enterprises, conducting joint office and approval, establishing shantytown renovation assistance mechanism, implementing “plan + change” loan issuance management and enhancing dynamic publicity of shantytown renovation and strengthening business training.
 
Strengthening risk control and management to reduce loan repayment risks. In the provincial level, Anhui provincial government authorizes the provincial department of finance to sign the Agreement on Balance with Construction Investment Corporation to provide it with capital to make up the balance, thus ensuring that it can repay the loan principal and interest to China Development Bank in full and on time. Construction Investment Corporation sets up a debt repayment reserve of 500 million yuan in China Development Bank to tackle with temporary risks of exceeding the time limit. The company establishes a provincial financial settlement and deduction mechanism to help those cities and counties that can’t repay the loan on time repay loans on behalf of them and then make up the reserve with settlement and deduction.
 
In the city and county level, the Anhui provincial department of finance requires the loan subjects of shantytown renovation in cities and counties to set up special accounts for repayment to integrate net proceeds from land transfer and tenement of shantytown renovation projects, sales revenue from projects supplemented by business, sales revenue form the rental and sale of projects, and the special loan repayment capital arranged by the city and county financial department to pay the principal and interest of due loans and related expenses. Meanwhile, to avoid financial debt risks caused by the lack of self-balancing ability of loan project, Construction Investment Corporation has strengthened its pre-loan review of the projects’ solvency coverage.
 
Issuing project income bond to expand financing channels. To expand financing channels, The Compnay innovates in the financing mode, takes the initiative to issue income bond nationwide and provides diversified financing support for shantytown renovation projects in the province. In November 2016, Anhui’s first project income bond, that is, the project income bond of Fuyang shantytown renovation project phase four (Binhe garden construction project phase one) issued in a non-public manner by Anju company, which was applied by Construction Investment Corporation, was official approved by the National Development and Reform Commission. The approved bond financing scale is 1.2 billion yuan, with a term of 6 years. The raised fund is specially used for the construction of Binhe garden project in Fuyang. It has provided replicable experience for the financing of other shantytown renovation projects.
 
Achievement
 
Social benefit
 
By the end of 2016, Construction Investment Corporation had provided 73.5 billion yuan for shantytown renovation and poverty alleviation in relevant cities and counties in Anhui, which guaranteed the smooth implementation of shantytown renovation project of 273,000 houses and the relocation project of 28,000 poverty-stricken people. It greatly facilitates the improvement of urban living environment and living quality of urban residents, the better city functions and the optimized urban space.
 
Compared with the current scattered financing in the cities and counties, Construction Investment Corporation adopts the “three unified” way of financing, which is characterized by convenience and rapidness, long loan terms, low financing cost and standard management. For instance, the shantytown renovation financing is a medium-and long-term loan, whose term is 25 years with a grace period of 3 years. The program’s benchmark interest rate for loans is 10% to 18% lower than that of the same term loans published by People’s Bank of China. The Company includes the 8.6 billion yuan of shantytown renovation loans of cities like Bengbu in China Development Bank into the unified provincial management platform to benefit them with the preferential policy of unified loans and unified repayment, which saves the financing cost by nearly 1 billion yuan for the cities and counties.
 
Economic benefit
 
Construction Investment Corporation assumes its main responsibility of provincial unified loan and gradually forms a multi-channel and diversified shantytown renovation financing system. By the end of 2016, the Company had a total asset of 80.59 billion yuan, a total profit of 53.11 million yuan and a net profit of 39.58 million yuan, and was rated as a A-grade company of Anhui Investment Group in terms of performance.
 
Prospect
 
Shantytown renovation and relocation of the poor are important livelihood projects. Anhui Investment Group will adhere to its position as a provincial function platform, takes the strategic position of new urbanization construction and major livelihood project and plays its role as a financing and investing platform to become the propellant and constructor of new urbanization construction in Anhui.