On The Restriction Mechanism Of Budget Law To Local

In many developed countries, local government bonds accounts for very great proportion intheir bonds market. It is not only a type of important financial products but also a kind offinancing instruments for local governments. It has become mature in many developed countries,which plays an important role in social infrastructure building and local economic development.As for bonds market investors, they consider local government bonds a good product to invest.Because this kind of bonds are safe and sometimes with tax sparing. However, in our country theBudget Law of China has forbidden local governments to issue bonds except for special statutorycondition, so local governments are unable to raise money by issuing bonds. But due to huge fiscalfunding gap, the local governments have to find other ways such as ‘quasi local governmentbonds’to raise money to avoid a breach of the above law. Those practices without institutionalconstraints and social supervision could not relieve financial burden, but may trigger a greaterfinancial risk. In2011, approved by the State Council, Shanghai city, Zhejiang province, Shenzhencity and Guangdong province began to issue local government bonds on a trial basis. In2013, twomore province is approved. However, there still some problems unsettled, such as whether thoseoperations conflict with current law in China, and whether or not to establish and improve thelegal system of local government bonds.In this paper, I bond practice with theories and then return to the practice, used the ‘sub-total-ponts’ structure. In Part One, I proposed that there exists a conflict between China’s Budget lawforbids local bonds and the require of raising money by the local government and based on whichI analyze the current status of local government bonds in China and the existing problems. In thesecond part, I discuss the relation among economic law, economic policy, economic order,economic system. Finally I come up with suggestions of how to deal with local government bonds.