Chinese Potential Probiems And Solutions Of Local Government Bonds

Local government bonds is the principle of local government under the credit,to cover debt service obligation securities issued by the premise and it is an important component of national government bonds.The funds raised by local governments for urban infrastructure construction and it is common existed in western countries.Western countries issue local bonds has proven to issue local government bonds more good than harm.Through the issuance of local bonds, local governments can strengthen the capacity of self-financing, to make up for the local utility and the shortage of funds development for public service.As long as the system is perfect and under strong regulation, local bonds will be conducive to local financing, to help strengthen the overall management of government debt and also to help guard against financial risks.But for various reasons, our "Budget Law" rules that,"apart from the legal and other provisions for the State Council, local governments con not borrow local government debt.'In 2008,under the influnce of the global financial crisis, Chinese exports decline as well as the insufficient domestic demands, the country's economic growth slowed down.ln order to stimulate consumption, expand domestic demand and restore economic development, the central government determined to implement a proactive fiscal policy.State Department ultimately agreed to issue 200 billion yuan of local bonds in names of central government by the Ministry of Finance through the means of the national bonds for local government finance investment in infrastructure construction and improvement of the social security system. The article focuses on local government bonds for a brief introducton and historical review, and then dissertate the necessity and feasibility of issuing local govermment bonds. At the end of the article,it analyzes the potential problems of issuing the local government bonds,for example,from the problem of direction and efficiency of the use of funds, repayment risks, legal issues and increase the economic disparities between local issues,and gives the corresponding solution.Included modify the Budget Law, improve the production of the local government bonds, strengthen supervision and so on.The feature of this article is the application of the behavioral characteristics of the knowledge of finance, while gave the corresponding solutions, combined with the actual situation of China, and also it did not copy the measures of western countries.