Research on the Risk Contagion and Governance Mechanism of Capital Chain Rupture in China's Construction Industry

Abstract

(1) Currently, accounts receivable in China's construction industry have exceeded 26 trillion yuan. Influenced by the industry's unspoken rule of 'advancing funds and extended payment terms,' the problem of broken capital chains shows a trend of cash flow pressure being transmitted step by step along the industrial chain, with increasing delays in project payments. It is characterized by a concentration of fund-advancing by vulnerable intermediaries, the difficulty of recovering funds even after winning legal disputes, and the absence of industry capital protection mechanisms. This seriously undermines the wage rights of construction workers, hinders the development of the industry supply chain, and reduces the effectiveness of government regulatory policies. (2)There is a substantial amount of research literature on this issue. Qualitative studies focus on the challenges of industry pre-financing, the empowerment provided by supply chain finance, and international risk mitigation systems, while quantitative studies concentrate on the quantification and assessment of risk factors. However, existing viewpoints fail to reflect the dynamic trend of multi-faceted and complex industry financial risks, resulting in conclusions with low applicability and a lack of consideration for full-process control enabled by technology. (3)This article focuses on the governance of funding chain fracture risks caused by the advance payment of capital by disadvantaged intermediaries in the construction industry. The research targets intermediaries in weak positions, covering the identification, measurement, and prevention of financial risks in the domestic industry, as well as the design of preventive solutions and the construction of an intelligent risk control platform. From the perspective of supply chain finance, it integrates the innovation of engineering insurance products with intelligent risk management technology to build an AI-assisted risk analysis model, conducting research along the dual dimensions of 'product protection and technological empowerment.' (4)Research has found that disadvantaged intermediaries face the risk of differentiated underfunding, with the risk transmitted along the hierarchy of "owner-general contractor-intermediate contractor-construction workers." The existing financial protection mechanisms in the industry have shortcomings: credit insurance coverage is low and mismatched with demand, while traditional legal and financial instruments have high thresholds and long cycles. Artificial intelligence technology can accurately identify and dynamically warn of financial risks, and innovations in construction insurance can effectively transfer and disperse risks across the industry chain. (5)Recommendations: Develop innovative engineering insurance products, namely customized performance bonds insurance; leverage an online intelligent platform to build a full-process risk control system covering 'before, during, and after' project stages; establish escrow accounts to achieve closed-loop fund management, and utilize artificial intelligence models for precise risk prevention and control; construct a multi-party participation mechanism with clear responsibilities and obligations for macro and micro risk sharing, promoting deep integration of insurance technology with the construction industry; draw on international risk mitigation practices to optimize the domestic engineering fund risk control framework, and enhance the effectiveness of policy implementation. (6)This study draws on the following: Methodologically, it refers to literature analysis, expert evaluation, and game theory analysis; conceptually, it draws on the core logic of the international engineering finance three-tier risk mitigation system, as well as the idea of integrating supply chain finance with financial technology and blockchain to optimize capital allocation; data is sourced from industry statistics, engineering cases, etc.; in terms of modeling, it incorporates artificial intelligence algorithm models such as gradient boosting decision trees and Transformers. By combining domestic practical optimization results, a dual protection mechanism and an online intelligent risk control platform were implemented. Through quantitative measurement of risk factors, simulation of game behaviors, and computational operations of AI algorithms, mathematical logic inference is accomplished, enabling precise assessment of intermediaries' default risk, validation of optimal insurance solutions, and scientific prediction of funding chain rupture risks.