Resource information
Urban Development Investment
Corporations (UDICs) have over the years become the central
pillar in the local government drive to build infrastructure
in China, where local governments are not allowed to engage
in direct market borrowing. UDICs were established during
the early 1990s when local governments were under great
pressure to both build municipal infrastructure and to
reform the role of the government in infrastructure
development. The UDIC model provided the local governments
with a corporate government structure to borrow from the
market and quickly develop infrastructure. They are treated
as municipal corporations under the Company Law of the
Peoples' Republic of China (PRC). The law does not
clarify the relationship between UDICs and the local
government, including the limits of the financial liability
of the local governments vis-a-vis UDICs. The Government of
China (GOC) agencies expect that the World Bank (WB)
Technical Assistance Report (TAR), based on the detailed
analysis of the financial operations of a selected UDIC in
Chongqing, will offer critical technical assistance to the
Chongqing Municipal Government (CMG), which can also be
shared with other Chinese cities. The GOC agencies realize
that this TAR is the first step in the right direction, in
that it will specifically address the needs of a
reform-minded municipal government and clarify one UDIC
model in detail. It is anticipated that similar efforts can
be undertaken in the coming years with other reform-minded
and high-priority cities that are employing different models
of UDIC to finance municipal infrastructure.
