Study On Local Government Bonds

Lately, the number of local government financing platform is exploding, theytakes a lot of money from the capital market. This leads to big local government debt,On the one hand, local government need money to support public service functions.On the other hand, law forbids local governments to adopt multi-channel debtfinancing. To resolve these contradictions, the Ministry of Finance started localgovernment bonds in2009. To control the risk of debt, the central government andNPC should play their roles. We need to build China local government bonds system.To establish a system of local government bonds, we need to define the right oflocal government bond issuance, find the theoretical basis and practical basis for debtfinancing. Local government to issuance bond is a right, rather than mere publicauthority. The theory of public goods, local government functions and autonomy canexplain local governments have reasonable financing needs. The current mode stillhas some problems and obstacles. Secondly, as many countries have established arelatively complete system of local government bonds, including experience andlessons, we can learn. Although the United States is a federal state, but its municipalbonds system has high reference; as a unitary state, Japan has also established asystem of local government debt management, its issuance and approval system Legalcontrol is worth learning; while South Africa’s financial transfer payments and lowerlevels of government to resolve the financial crisis in the termination phase of thesystem is worth considering. Finally, the bond is caused by credit and debt, localgovernment bonds as well. Starting from the nature of the relationship between creditand debt, the debt from the establishment phase of the relationship, the existence ofphase and termination phase analysis to improve our system of local governmentbonds should have meaning.According to the current trend of reform, the establishment of the system of localgovernment bonds is the current trend; the key is how to control.If establishing areasonable system of local government bond, it benefits not only improving thequality and speed of public service functions of local government, but also allowingthe majority of taxpayers share the results of the reform. Scenes from the capitalmarket, the local government bonds also can rich variety of Chinese multi-levelcapital market.