Research On Issues Of Local Government Bonds

In1812, New York of the USA released the first local government bonds, and establishedthe local government bonds market. The emerging market developed rapidly in the ensuing200years with the support of the U.S government. Local government bonds market ispreferential treated by the local government and in the meantime. Local government getsgenerous benefits from the activities of issuing local government bonds. Of all thedepartments in a country, the central government is responsible for global macroeconomicregulation and control, while local government is responsible for the specific implementationof the regional economy. The central government is the designer and instructor in economicmanagement and has no enough encrgy to concrete implementation of all aspects of themicro-economic work.. Only the local government knows best what the local governmentspecific needs. And it is the reason why local government bonds developed rapidly in Japan,Western Europe, North America, Southeast Asia and other countries.In the international local government bond markets, the development of the United Statesand Japan is extremely significant. The excellent performance of the two bonds makes themthe most representative of local government bonds. Reviewing the issuing footprint of localgovernment bonds of the two countries, we should not only summarize the valuableexperience, but also draw profound lessons. Only on the basis of previous experience andlessons can we improve ourselves. This paper analyses deep the two high-quality localgovernment bond markets of the United States and Japan, and objectively compares the twobonds markets. Relevant comparative results are listed in the form of a comparison table, andwe can visually see the similarities and differences in the process of management of localgovernment bonds in the two markets. The system research and study will help guide thedevelopment of local government bond market.Due to historical reasons, China’s local government bond market started early but formedlate. In the early days, the Northeast People’s Government had issued local government bonds,but then China’s local government bonds came into the frozen period. So far from the frozenperiod, the "Budget Law" always does not allow local governments to issue local governmentbonds. Until around2009, the U.S. subprime mortgage crisis swept the globe, and China’seconomy was also severely affected. In order to stimulate national economic development andalleviate the pressure on local government funding, the Ministry of Finance issued localgovernment bonds on behalf of local governments. Though the bond was issued by the Ministry of Finance instead of local government, this event flagged that our government triedto operate the local government bond market. In the next two years, the Ministry of Financehad issued a number of quasi-local government bonds. In2012, Ministry of Finance issued anew policy which made the four cities of Shanghai, Shenzhen, Guangzhou and Zhejiang asindependent issue bonds pilots. So far, China’s local government bond market finallyconforms to the trend of social development. Because China has just begun the release oflocal government bonds, we are lack of management experience and system rules and shouldencounter many problems in the operating of bond business. This paper, combined with theexperience of the international local government bond markets, researches the problems atthis stage in the local government bond market and provides reasonable system designs andsolutions. Each step from the issue of pre-management system and internal control, to issuemedium-term use of funds and performance appraisal, and then to the debt repayment issue oflate and risk dispersion, has been reasonably arranged in this paper. Only with perfect systemsand effective managements, can we establish and improve China’s local government bondmarket as soon as possible.