A Study On The Legal Problems Of Local Government Debt Regulation

This year, the local government debt has become a hot issues to discuss in the theory andpractice sessions. According to statistics, as of the end of2013, the local government hasresponsibility to repay the debt of about10.9trillion RMB. The local debt is the inevitableoutcome of the economic development, but China’s local government debt is lack of legalregulation and system constraints, which brought great risk to the local government debts, andendanger China’s financial security. This paper gives a brief introduction to China’s localgovernment debt situation, and an analysis of the main legal problems among them. Through thecontrast between the local debt system of U.S. Japan, Germany, and related system of our country,the author gives suggestions and review of local government debt in China.This paper concludes from four parts:At the beginning, the introduction part introduces the history of local government debt,including the reform of the tax system in80s, and the origin of local financing platform financialreform in90s.The second part introduces the current situation of local government debt in China, includingthe amount of debt, the concept of local financing platform, members and development.The third part analyzes the main problems of our local government debt, including debtborrowing subject’s legal personality defects, guarantee in lack of legal basis, the legaldeficiencies, and then explains the risk dominant, that China’s local government debt is in need ofreform, and suggests that we can learn from foreign local debt system.The fourth part introduces the USA and Japanese local debt system from three angles,issue,management and regulation, while comparing the related researches with our system in fouraspects: laws and regulations,debt subject qualification, supervision system and mechanism.The fifth part gives proposals to our country local government on debt regulation, includingcompleting the legal structure of local financing platform, setting up perfect supervision system,the establishment of specialized regulatory agencies, and orderly open local borrowing authority.In the last part of the article, the author has given the conclusion based on the analysis. Theauthor believes that the improvement of the legal and regulatory system of local government debtin China at present stage is only a stopgap measure, and puts forward the proper configuration inthe central local governance, local government and its power to match the borrowing authority.The author gives proposals on improving the fiscal transfer payment system and the tax system assoon as possible, speeding up the transformation of government functions and deepening politicalsystem point of view.