The Research For Improving Local Government Debt’s Supervision System In Path Of Budget Law

The pace of industrialization and urbanization is being quickened, and more expenditure duties were bear by Local Government. However, due to limited fiscal powers of Local government and incomplete Fiscal Transfer Payment System of China, Local Government has to borrow money to provide fundamental public good and public service and proceed large-scale construction on infrastructure. And it results Local Government’s debt. When Local Government borrows too much money and bear too much expenditure, risk for fiscal, financial, social and others will come out. For present and future of China, it is important to strengthen effective supervision of Local Government’s debt, to control the extra risks and keep sustainable development of Local Government’s debt. Law has characters of mandatory, stability and standardization so legislation is the best and most efficient way to standardize supervision of Local Government’s debt and control risks which are caused by government debt under present political system. Law should be the basic rule and standard for present supervision of Local Government’s debt. It is based on Budget Law of the People’s Republic of China(here in after referred to as Budget Law) for China to draw up related Laws and Regulations for supervising Local Government’s debt. Budget Law has principled and oriented effect on government’s behavior of revenue and expenditure and should be the principle and base for related issues of supervising Local Government’s debt.Material revisions of issues of supervision of Local Government’s debt were made in Budget Law(revision of the year of 2014). It is shown the direction and guideline for pre-supervision, supervision and post-supervision of Local Government’s debt. Furthermore, some issues of Local Government’s debt are still need to be reviewed and perfected under the whole supervision framework though the framework under Budget Law is without major issues. This paper is detailed divided into 4 parts for discussing supervision of Local Government’s debt.The 1st part is the analysis on present situation, causes and evolution mechanism of Local Government’s debt of China. Only the present definition, categorization, scale and constitution of Local Government’s debt being looked into, the existence of this paper’s research object which needs to be perfected could be understood in surface and the issues of supervision of Local Government’s debt could be found. Also in this paper, in perspective of causes and extension mechanism of Local Government’s debt, the generation and proceeding of Local Government’s debt is also proved in nature, and on this basis, the effects of Local Government’s debt can be analyzed.The 2nd part is the analysis on the difficulties of supervising Local Government’s debt under Budget Law. Under the frame of Budget Law, four difficulties are found in the situation that there is no method to use laws to supervise Local Government’s debt effectively and reasonably. The four difficulties are the issues of routine power and financial power between central and local, the difficulties between legal prohibition and gradual approval on Local Government’s bond issuance, the defects on rules of Fiscal Transfer Payment System in Budget Law and the lack of post-supervision system when Local Government is defaulting on debt.The 3rd part analyzes Budget Law System for supervising Local Government’s debt in U.S.A and Japan and draws on experience from it. The experience is not only to provide us effective methods and solutions of solving present issues of Local Government’s debt but to lesson us from legal dilemma faced by U.S.A and Japan on Local Government’s debt in past and present.The 4th part is the suggestion on perfecting the route of Budget Law on Local Government’s debt. Related suggestions are proposed to solve the issues found in supervision of Local Government’s debt. The suggestions are to properly routine power under the Budget Law between central and local and on this basis, to give the matched financial power to Local Government, to confer more decision-making powers of bond issuance on Local Government by Budget Law, to Establish and improve the local government bond credit rating system,to perfect Fiscal Transfer Payment System under Budget Law and provide effective and rounded principle for Fiscal Transfer Payment System,to Clear stock of debt processing in Budget Law in local debt replacement for way and the last to supplement and improve the related rules in Budget Law of post-supervision on Local Government’s debt and to establish the system of bankrupt and reconstruction of finance of Local Government.