Government's Capital Function And Developmental Research On The Local Government Bond Market

The government has the function of the assets operation, it forms its property through many kinds of channel, and offers society service and maintains the market order through its own direct investment, that is the government exercises its capital investment and financing function to serve for local economic development in the economic life. The developed country experience indicates that the municipal bond can meet the demand of the local construction fund under the decentralized mode of public investments better as the decentralized financing tool. Therefore, it is the effective tool that strengthens the local government's capital function and standards the central government's capital function. In our country, "Budget law" limits strictly that the local authority issues the municipal bond, not only the capital function of local government is incomplete, but also has intensified the asymmetric pattern of property and duties and responsibilities of the local government, so that the local finance's running fell into the difficult position. The urgency of building the local government bond market to melt the local construction fund has come to light day by day.This article gives the government's capital function definition from the angle of offering the public service, and analyzes the capital function's various kinds of ways of realization and current situations in the field of investment and financing of local government of our country at present, points out the existing income ability can not meet demands of its expenditure in a situation that the duties and responsibilities are expanded day by day, because that the local government of our country lacks the financing way in the real significance of capital function. So it is the necessary to develop the municipal bond market to strengthen local government's capital function. And then article analyzes the cost and the income that the local authority issues the municipal bond from bond-issuing impact on economic life. Because of the income far greater than the cost of bond-issuing, the local authority can strengthen its capital function by issuing debts. Moreover, the treasury's operation experience for many years, the huge storage quantity of capital and the enormous capacity of bond market offer the advantages for issuing the municipal bond. The most main barrier which the debt issuing needs to overcome is the question about the risk controlling of the municipal bond. Finally, the article regards controlling the risk effectively as the main purpose, put forwards some policy recommendations to establish the local authority bond market in our country from the micro system design and the macro-control.