Research On Legal Risk Prevention Of Local Governments Autonomously Issuing Bonds

The local government bond refers to a type of debt obligations issued to raise funds by the local government which has its tax and credit as a guarantee and bears bond maturity debt service. The developed western countries consider it as a mature and basic financial product and local governments investment and financing tool, and it’s thought to have a beneficial effect on the local economic development and the social infrastructure construction. In China, new regulations have been set concerning local governments autonomously issuing bonds in the new "Budget Law" implemented from January 1, 2015, which says provinces, autonomous regions and municipalities directly under the central government may raise part of the funds in the budget approved by the State Council through the issuance of local government bonds to invest in the necessary construction, within the limits set by the State Council. But there is no definite regulation regarding the legal risks arising in the process of local government bonds issuance. The existing legal supervision system of the local government bond has many problems. For a long time, the legislative practice of local government bonds in China has been large, chaotic and miscellaneous; the legal system construction has been directed mainly by normative documents and policies; the system content has been abstract and recapitulative; the institutional supervision has been unreasonable; the information disclosure system is not perfect; and the credit rating system has been deficient. All these problems have kept China’s existing law system from preventing and resolving the legal risks of local government bonds.Starting from the connotation and historical change of local government autonomous bonds issuance, this paper defines the concept of legal risks of local government issuing bonds, and summarizes the types of legal risks that may occur in the issuance process.Using the United States’ and Japan’s more robust local government bond legal risk prevention supervision system for reference, and combining the actual situation in our country, this paper puts forward some countermeasures for the establishment of legal risk prevention system for China’s local government autonomous bonds issuance. Improving legal risk supervision of local government bonds not merely prevents all kinds of potential risks, guards against decision-making mistakes, but is the need of realizing law-based governance. Therefore, only by forming the complete localgovernment bond legal risk prevention system, establishing the sound local government bond legal and regulatory framework, improving the legislative level of local government bonds, perfecting the information disclosure system, building local bond debt constraints and service system can the local government bond really contribute to local economic development and local infrastructure construction.