| Municipal securities are issued by state and local governments and by special districts. Interest on municipal securities is exempt from federal taxation. Municipal securities come in a variety of types, with different redemption features, credit risk, and liquidity.In contrast to US bond market, there are no municipal securities in Chinese bond market. Municipal securities provide a low-risk, high revenue investment instrument for investors. In the other hand, municipal securities provide a low-cost finance for state and local governments.According to the Budget Law of the People's Republic of China, local authorities cannot issue municipals. As the development of economy, the demand of fund for utilities, education, public health, district development are increasing. As the gap between tax income of government and municipal capital demand becoming larger, China must find a new way to solve the problem. Municipal securities provide a feasible and effective solution.Many market participants call for the amendment of the Budget Law to remove the legislative prohibition of municipal securities. They believed Chinese bond market has becoming mature. They also argued that the appearance of the so-called near municipals reflects the existence of municipals. Municipals will also provide an excellent investment instrument for investors.Municipals have a long history in other developed economies. Municipals weighted about 1/3 in the US bond market value. Chinese can reference the mechanism of US and other economies to develop Chinese's own municipal market.Municipals have a high level of credit rate, Moody and the Standard and Poor usually give AAA rating to municipals. But there are risks in municipal investments. Investors must be aware of these risks in order to... |
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