Research On Legal Regulation Of Local Government-backed Investment Units

Local Government-backed Investment Units(LGIU) is the product of meeting the demands of economic growth and state authority since China's reform and opening-up. In reality, LGIU can be considered as a newly-born phenomenon with chinese characteristics for the purpose of resolving financal problems in local governments. As being tied closely with local governments, they cannot avoid being influenced, and furthermore, protected by the government both subjectively and objectively. This intervention, however, goes against the principles of market economy and huge risks may be involved.At present, poor social credit, lack of regulations and imperfect legal system of financial supervision in China result in complex conflicts of interest and regulatory problems, which drives us to strengthen the supervision thoroughly to guarantee its safety and stability of society. In its micro sense, we must start the regulation from each unit per se and be aware of the risks involved. Since this approach mainly depends on policy along with market changes, it has great flexibility and lacks the overall control when systemic risks occur. And we should still pay attention to the supervision in its macro sense, that is, to make rules and construct a complete legal system for a long-term, reliable and stable regulatory protection. It's not only a necessity but also an urgent task.This system's construction should be based on China's situation and borrow the advanced experience from foreign countries. China's situation is the necessity of LGIU's existence and the lack of financial supervision of the law, and it presents both a challenge and an opportunity for us. The experience of other countries in monitoring local debt has many similarities though they have different national conditions and customs, namely, improving the legal system budget and final accounts, establishing an open and transparent data distribution system, building early warning and risk prevention system, and setting up reward and punishment system. We can take them as references to build the financial supervision rules and constantly improve our financial regulatory law for a sound legal system for financial supervision.