Local Government Financing Platform Legal Regulatory Issues Research

Local Government-backed Investment Units (LGIU) is a product of our special finance system. Especially in recent years, LGIU receives a great development, the amount increased and dimensions expanded ceaselessly, which resolves the financial problems of the local government, and has made a significant contribution to urban infrastructure construction, public construction and local economic development.However, because of its association with the local government closely, it bears the government administrative power intervention, more or less. The intervention provides some benefit to LGIU, but also brings potential risks for violating market regulation. Financing activities of LGIU will produce debts, which are vested in LGIU nominally, but in fact, these debts requires local governments to repay for many of the platform investment in public projects producing no or only a small profit. Even profitable projects, there is often a local government’s implicit guarantee. Once the debt defaults, the local government must foot the bill. In a sense, the debt of LGIU is the local government’s debt.Currently, our country does not owe special agencies for the supervision and management to LGIU. Though the relevant State Council ministries assume the supervision tasks, the authority and duty are unidentified, and many problems are ignored. Also, there is no special law to regulate LGIU. Policies released by relevant ministries of the State Council can not constraint LGIU effectively. Admittedly, there are many problems for LGIU, but these problems can be solved. Now, we should establish the corresponding system of laws and regulations as soon as possible, and manage LGIU through legal means. Meanwhile, to enhance management level and effect, a clear division of labor between various regulatory authorities or setting up special agencies is necessary.Abroad, although there is no LGIU, but they have extensive experience in the management of local government debt and a complete regulatory system for it, such as the budget and final legal system, open and transparent data dissemination system, risk warning system and the accountability system. These are important references for construction of legal system for the supervision and management in our country. This article will sum up the effective ways to solve these issues by the analysis of them, combined with the experience to deal with similar problems abroad. Then they will be raised to the legal aspects and regulate LGIU institutionally.