Discussion On The Issue Municipal Bonds Of Local Government

Municipal bond, which belongs to the local government debt and issued by the local government or their authorized agency, and the collected funds is used to the construction of municipal infrastructure facilities. Our research on municipal bond is still in the infancy, and the relevant writings and research papers are rare. Municipal bond does not exist in our bond market. Seen from other country 's practices, as one of the tools of collecting money for the municipal construction, municipal bond has been received recognition for its availability in America, Japan and many other European countries. Especially in recent years, more and more countries, in particular the developing countries have been started to collect money for the local government by municipal bond. In using the maturity experiences in developed countries for reference, this paper analyzes domestic political and economic situation, then prescribes how to build and develop municipal bond market in China so as to satisfy the large volume need of capital and money to promote the growth of urbanization and capital market in China.There are four parts in this paper. First, I discuss the theory basis of the local government debts and analyze the necessity and feasibility of issuing municipal bond. Secondly, I discuss the management method of municipal bond in America and Japan which are in the different government forms. In the theory basis and other countries experiences, I propose the detailed system design of building municipal bond market in China and how to perfect the relevant supporting facilities.Specifically speaking, the first part of this paper introduces some basis conception about municipal bond and points out the municipal bond is an important source of collecting funds for the construction of municipal infrastructure facilities by local government. At present, our budget law does not permit the local government to issue the public debt. But according to the public goods theory and the requirement of establishing the revenue - sharing financial system, the local government should provide the local public goods efficiently, so the right of issuing debt is the basic economic rights of local government. At the same time, I point out the necessity of issuing the municipal bond in perspectives of promoting urbanization, solving the debts risk, strengthening the debts management and so on. Also, I analyze the feasibility of issuing the municipal bond in perspectives of domestic economy condition and good opportunities.The second part introduces the municipal bond market in America and Japan which are in the different government forms. America has the most advanced municipal bond market, which is a very magnetic financing tool. In this paper, I describe the trait and method of the issuance, purpose and management of municipal bond. And then I introduce the operating mode of issue and management of municipal bond in the unitary state - Japan. The management experiences of municipal bond in the different government forms give us much revelation about our municipal bond issuance, which is worth studying.The third part gives the detailed system designing of issuing municipal bond from three aspects of issuing, circulating, using and repaying on the basis of theory and other countries practices. In line with the current situation with our country, I give a detailed discussion about choosing the main body of issuance, deciding the scale of issue, and the capital structure, the way of issue, the tax treatment.The last part of this paper gives the relevant supporting facilities of issuing municipal bond. It needs to perfect the supporting facilities, including the following three aspects: the first is to perfect the relevant laws and regulations, including the amelioration of relevant laws, improving the system of tax division between central and local governments and establishing the local debt budget; the second is to strengthen the supervision and the risk control of municipal bond, establish the credit rating agencies and information publishing and develop the insurance of municipal bond; the third is to promote the coordinating development of the debt market, including municipal bond and public debt and financial debt and corporation debt.