Research On The Construction Of Local Debt Sinking Fund System

After the commencement of the new Budget Law, the local government began to have limited right to issue bonds, and local government bonds have also become the normal. It has a positive impact under our current financial regime. Local governments issue bonds to makes up the lack of local financial power, guarantee the performance of local governments and promote local economic and social development, etc. However, we should realize that if the local government debt cannot be repaid, it will lead to explosion of local government debt risk and will most likely to trigger financial crisis, thereby endanger the stability and development of national economy. Therefore, how to effectively control the local government debt risk, has become an important topic of future research which must be addressed. 2014 the State Council issued the State Council on strengthening local government debt management advice stipulates the principle that the central government cannot assist local governments to issue bonds, emphasizes the local government should issue and repay the debt on their own. The more discretion of local government bonds, the larger responsibility of the repayment. And the debt should also be more standardized. It is determined that a stable source of local government debt repayment is particularly necessary. It can be said that the establishment of a stable local government debt sinking fund system is the key initiative to resolve the local debt repayment risk.The basic theory of local debt sinking fund is the prerequisite for its system structuring. Local debt sinking fund is a special fund used to pay the local government debt, in nature it is a kind of government funds. At the same time, the existence of a system must have its theoretical basis. It is also true for the local debt sinking fund system. theoretically, the basis of system construction of local government debt sinking fund includes public finance theory, intergenerational equity theory and asymmetric information theory. In addition, local debt sinking fund system’s functional value is to prove the feasibility of its construction. Specifically, the local debt sinking fund is a stable source of repayment of local government debt, which can effectively respond to the central government’s non-rescue principle, protect government credit and balance the pressure on the government budget debt peak.At present, although some of the local governments have set up a sinking fund system, many problems still exist.the main manifestations are as follows:local debt sinking fund has not been established universally; Source of debt sinking fund is not guaranteed; the specification of debt sinking fund is at a low level; The cost of debt sinking fund is irregular; the re-use of local debt sinking fund is Ossified. The reasons for the above problem is the defects of Chinese Financial System, lack of legal regulation and the weak constraint of local debt sinking fund on the budget.The United States, Japan and Taiwan of China all have in-depth study on sinking fund system. They have built a relatively complete system to protect the sinking fund operation. In view of this, it is necessary to learn from the extraterritorial successful experience in combination with Chinese reality to build a local government debt sinking fund system suitable for China. Comprehensively, in all aspects of local government debt sinking fund system construction, the principle of legal rights, responsibilities unifying, openness, transparency must be implemented throughout the entire process of system construction. Specifically, from the point of system structure, the author first determines the size, source and regulation of sinking fund to discuss the collection of sinking fund; then discusses the using of sinking fund from its applicable targets, management and hard budget constraints; Finally, the author discusses the supervision of sinking fund by people’s congresses, the audit institutions.