1、The Source of Capital for UrbanizationThe central conference of ur- banization from December 12 to 13， 2013 detailed the six major tasks needed to be finished in the future of urbanization and issued the National Program of New Type of Urbanization. The new document has been submitted to the Nationa
2、l Development and Reform Commission （NDRC） for modification. Xu Shaoshi， president of NDRC said that the organization would finish the modification as soon as possible. The modified program is to be considered the guideline of urbanization in the future and it will point out the orientation of China
3、s urbanization project. But， before the orientation is clarified， there is a problem capturing peoples consideration as well： where does the money supporting the urbanization come from？ Since the urbanization is an indispensable project in China. There are agencies having made a budget for it. Accor
4、ding to the estimation of the National Development Bank of China， the urbanization of China will need the investment of at least 25 trillion yuan in the next three years. The Multiple Fundraising Channels Such a great need of capital means a great stress. Therefore， the central government of China p
5、ut forward the goal of building a multiple， marketoriented and sustainable capital guarantee system for the urbanization， which is one of the six major tasks concerning the urbanization. According to Li Peijia， a researcher with the International Financial Institute of Bank of China， the “multiple，
6、market-oriented sustainable capital guarantee system” covers three aspects. The first one is the “multiple system”： more types of financial institutions and bodies should be involved in the urbanization. The second one is the requirement about a more “market-oriented” system， which gives the priorit
7、y to the role of commercial banks in the source of capital for urbanization. The loans for small and medium enterprises should be expanded to provide more catalyst for the linked use of the capital market and the credit loans The last one is the rule of being“transparent” about the fast issuance of
8、municipal governmental bonds and the roles of the policy financial institu- tions as the “safety valve” and safeguard forces. Actually， the loans from banks are now playing an important role in the process of urbanization in China. The funds for the construction of public facilities in cities mainly
9、 come from four sources： the central governments fiscal system， the local governments fiscal system， the domestic loans and the self-raised funds. From 1996 to 2012， the four parts respectively contributed 2.16%， 25.6%， 31.6% and 28.6% of the funds for the construction of public facilities in cities
10、. The loans from commercial banks took the leading place. In addition， the policy banking institutions， and commercial banks， especially the large ones， have the commercial loans take a large part of the their loan balance. The policy financial institutions have an irreplaceable role in the urbaniza
11、tion. According to some experts， the policy financial institutions have apparent characteristics as the government. The biggest advantage is that it can concentrate its force on one big task. In the previous practices， the policy financial institutions can actively integrate the policy， financial， l
12、and， fiscal and administrative factors as long as it can recognize the functions of other financial bodies and follow the market rules. Through this they can substantially promote the urbanization and help to create the access for the commercial finance and social capital. As for the establishment o
13、f policy financial institutions for the housing， Li Peijia said that the biggest lesson China leaned from the real estate industry in the past 15 years is that being “excessively market-oriented” leads to the short supply of indemnificatory housing in China. Therefore， the development of policy fina
14、ncial institutions for the housing should be helpful to increase the supply of indemnificatory houses. This is good for solving the residency problems of the low- and mediumincome earners generated during the urbanization and can accelerate the process of urbanization. More Investment into Comprehen
15、sive Services The urbanization cannot be done without the financial support. This will be easier to see in the next few years. According to the estimation of relevant governmental department， the governmental fiscal support could onl account for one fifth of the newly added investment into the urban
16、ization from 2013 to 2015. In consideration of the limited financing scale through local governmental bonds and the tim needed to involve the social capital into that case， the experts believe that th credit capital from banks will still be an important source of the capital for th urbanization in C
17、hina. y-eee Then， how can the banks suffice the role to provide enough loans for the urbanization without damaging themselves？ First of all， it needs to increase the credit funding investment. The estimation of the NDRC said that the urbanization ratio would be over 60% and the urban population woul
18、d hit 840 mil- lion by 2020. Therefore， the construction of urbanization is a great burden. According to a director from a stateowned big bank， the commercial banks put more investment into the human resources， financial strength and assets in order to make sure the urbanization can get enough finan
19、cial support. The detailed rules include， for example， the enhancement of the credit capital allocation， the exploration into the special funds and credit plans for the urbanization. Meanwhile， every year， a certain amount of loans could be left for the temporary but strategically important projects
20、 of urbanization. In addition， the allocation of financial resources and human resources should be further enhanced to bring the value guidance and incentive function of the resource allocation into full use. Secondly， the commercial banks should be positively involved in the construction of project
21、s concerning peoples livelihood， residency， social security， environmental protection and energysaving during the urbanization process. In addition， they should judge the trend of the industries in the urbanization， find out and support those industries having good development outlooks and matching
22、local features. Lastly， the financial institutions should make innovative financial products to provide the financial services for the demand of new urban population in the residence， consumer goods， education and ctulture. In addition， experts called for the governmental subsidies and favorable tax
23、 income for banks which have provided substantial and significant support for the urbanization， so as to guarantee the revenue of the projects and the source of repayment. This could maintain and improve the stability and security of the fundraising for the infrastructure projects during the process
24、 of urbanization. Challenges and Chances of Urbanization For the banking industry， their support for the urbanization means the chances and challenges from several aspects. The development of infrastructure and the industrial restructuring will bring new economic growth points for the banking busine
25、ss. Li Peijia said that the urbanization was usually accompanied with massive infrastructure construction and industrial restructuring， such as the move of manufacturing from east to west of China， the unexpected development of third industries featuring the rise of small and medium enterprises and
26、so on. All these will provide new room for the business development of commercial banks. In addition， the upgrade of the residents living and work patterns will bring about the increase in the retail business. The urbanization will increase the income of farmers， who are turned into urban citizens d
27、uring the process. Their need for housing， healthcare， communications， education and culture will be released as well. In order to expand their business to suffice the demand， small enterprises and private vendors ?sometimes even big enterprises ? will need the loans from commercial banks， which wil
28、l drive the retail business of commercial banks. Notably， the multiple fundraising system will bring about certain impact to the commercial banks. Those having survived the competition will undoubtedly become stronger. The challenges are giving priority to the “periodic financial risk” caused by the
29、 over-speed urbanization that outpaced the population increase and industrial upgrade， as well as the repeated pattern of urbanization. The practical experiences told that the stress lingers over the fundraising platform of local government. Presently， local governments are heavily relying on the in
30、come from selling or leasing and to repay their debts. That could increase the instability of local governments repayment ability. Therefore， it is necessary for commercial banks to pay attention to the sources of repayment of loans and the confirmation of loan borrowers when they provide financial
31、support for the urbanization. They should run their business with complete compliance. Moreover， they are advised to look for a more efficient way to manage the risks brought by the urbanization. “Commercial banks need to think carefully over the development levels， potentials and industrial characteristics of different cities.” Li Peijia said. “And they could provide differentiated financial services for different places based on it with better market-oriented rules and risk-prevention conditions.
