The Style Of Local Governments Financing Problems And Solutions

With the continued acceleration of modernization, China's financial reforms are developing, however, it followed by various contradictions, such as local governments do not regulate the allocation of powers and financial authority, the local financial system is not perfect, local governments'shortage of construction funds. In the government work report 2009, "State Department agreed that the Ministry issue 200 billion yuan of local bonds, which included in the provincial budget management" have aroused wide attention from all parts of society, which is the second time from 1998,the local governments issuing bonds through the central parts to solve the financing problems. Undeniably, public financing is the chief way of local governments to achieve its non-equal powers. Local governments use financial investment and financing ways can effectively alleviate the pressure on local fiscal expenditure, but use these traditional ways to get the limited financial resources is far from enough. Local governments can't meet the current macro regulation and control and the promotion of local economic sustained, rapid, healthy and coordinated development. Therefore, it is important and urgent to do research on how to use and integrate existing resources, strengthen local governments financial management, standardize and open up new financing channels.The paper based on existing research and relevant theory of public finance, such as public goods theory, item discrimination theory and financial development. The paper aimed to improve the environment of local government finance, introduce the connotation and the need for local government financing, use theoretical analysis and empirical analysis using to do research on the current financing ways of local governments. In China, there are four main ways: direct financing, indirect financing, project financing and trust financing. Then, analyze the effects of each financing method separately. Among them, the advantages and disadvantages for the four kinds of financing methods and its effects are compared and analyzed.Through analyzing the four kinds of financing, the paper finds the main problems, the harm caused by these problems and local financial risk. At the same time, introduce the advanced experience of foreign financing of local governments, focusing on loans for investment in Japan model, Poland's national environmental protection fund and the U.S. municipal bond model, combined with China's own characteristics, aimed to learn from them. Finally, by comparing and learning from international experience, explored methods which suited to our current political structure and economic development level of local government financing to prevent local financial risks while to optimize the size of local financing.Recently, China's leading state-owned high-quality assets can use direct financing way: make construction invest company as a platform for issuing medium-term notes and corporate bonds, project financing, financing instruments and innovative ways of raising local funds for construction. In the long run, local government finance can be gradually put into the legal system, the securitization of infrastructure charges and the establishment of a system of local bonds means of expanding local financing channels. Moreover, by deepening the financial management system, build local government financing system to pave the way for local government finance.