Warning Risk Of Local Government To Issue Bonds

The local governments should rely on some financial support to carry out the economic and social functions, in order to increase the governments’financial revenue, local governments usually increase the funding sources by issuing bonds and other debt financing. It’s common that the local governments issue bonds by themselves in the foreign countries. There are a series of risks during the process of issuing bonds, it may increases the risk of local government debt if it has not been timely control and prevention. Our country introduced the policy to allow the four pilot provinces and cities to issue bonds by themselves in2011. With the gradual decentralization of the local governments’authority in issuing bonds, the local governments should build a risk early warning system of issuing bonds by local governments in order to control the expansion of risk and prevent the outbreak of the debts crisis.This paper firstly describes the objective basis of issuing bonds by the local governments themselves in theoretically, and analysis the influencing factors of the risks in issuing bond comprehensively. Through the comparative study of the municipal bond risk early warning methods in the foreign local governments, it provides the experiences and advises for our local governments to build the municipal bond risk warning system. Secondly, the article build a risk index system of issuing bond by local governments themselves from five aspects of debt scale, debt structure, debt management, solvency and default situation, and have a descriptive statistical analysis of Zhejiang province from the four pilot provinces. On the basis of comparative analyzing the risk early warning methods, the article selects the fuzzy comprehensive evaluation method to assess and warn the risk of issuing bonds by local governments. The results show that the local government of Zhejiang faces greater risk in issuing bonds by themselves, mainly due to the yearly accumulated debt burden of local government, the unreasonable distribution of financial authority and powers, and the huge investment expenses in public utilities constructions. Finally, on the basis of risk warning research of issuing bonds by local governments in pilot province, the article provided for example to build crossing organizational system of local government debt risk warning, establish the dynamic debt early warning and monitoring mechanism and regular the warning information disclosure system of the local government’s debt to improve the risk warning capability of issuing bonds by local governments, and promotes the sustainable development of local government bonds issued.