Research On The Issue Of Local Government Bonds In China

During 1950s, Chinese central government issued the state economic construction bond, and some provinces had also issued a small amount of Municipal bonds, such as construction bond on a parity with commodities in the northeast, municipal economic construction bond on a parity with commodities. Because of local government finance had a closely relation with central government, not completely independent at that time, in consideration of problems such as the influence of treasury bonds issuing, Municipal bonds affected the issue of national bonds, and uncontrolled problem of Municipal bonds, the Municipal bonds had been canceled for a long time.Since1981, The bond market reopened, bond market as an important component of the emerging capital markets, had got a rapid development and strongly promoted the process of national economic modernization. However, municipal bonds still forbad. Municipal bonds financing phenomenon did not exist. According to rough statistics, Chinese invisible debts were about more than one trillion Yuan in recent years, these debts were used to regulate local economy and public construction investments. In fact, the local governments as a main part of market system have important responsibilities of local economic construction, however Unequal rights and responsibilities, would affected the performance of economic construction responsibilities. Hence whether willing or not, the demand of local governments bonds is an objective reality fact.In general, the continuous economic development, the residents average income level has greatly improved; the deposits couldn't meet the need of investments, these reasons provided the opportunity of issuing local governments bonds. The national bonds had issued nearly thirty years, it had accumulated a lot of experience and theoretical knowledge; the continuous financial and insurance market, had built a reliable legal environment. Consequently, the issue of local government bonds became feasible.Scope and risk management problems and so on, when issue local government bonds would meet, the central government should regulate the issue modes, properly definite the issue subject, scope and objects of Municipal bonds, clearly defined the types and function of Municipal bonds, scenically set out the civil bonds duration and interest rates. And in view of above, improve the local government functions and our existing"revenue-sharing-scheme"financial system, strengthen the management and monitoring process of using the local debts, establish supporting systems for the virtuous circle of financial market, to ensure the Normal Operation in issuing of local government bonds. To relieve the local government financial pressures, and promote economic development.