Research On System Design Of Local, Government Bond In China

With the ending of the work of local government bonds issued in2012, China’slocal government bonds has issued for four years which has accumulated from the"ice-breaking" a total amount of850billion yuan, the change from the earliest modethat the Ministry of Finance on behalf of issuing and repaying to Shanghai, Zhejiang,Guangdong, Shenzhen which own the right of issuing the debt by themselves, in2009China’s local government bonds had only3-year period bonds and in2012China’s localgovernment bonds had expand with3,5,7-year period bonds. The amount of issuedbones of200has rose to250billion yuan in2012.In2009, the State Council clearlyindicated, as the fiscal functions of the local government, local government bonds are toraise funds for the supporting central investment in public welfare projects and otherpublic welfare projects which difficult to attract social investment, investment projectfunding include:affordable housing projects, rural livelihood and rural infrastructure,health, education, culture and other social undertakings, infrastructure, ecologicalconstruction projects, post-earthquake restoration and reconstruction, as well as otherrelated to the project of livelihood construction. However, local government bonds aslegalization and standardization in financing way for government, issuing China’s localgovernment bonds are lacking of legal and clearly institutional administration. How todesign the system of administering local government bonds has become the focus ofgovernment departments and academics.In this article,Firstly, using standardized analysis to come to the value andsignificance of local government bond issuance by the study of literature and theoreticalbasis information. The theoretical basis are the theory of public goods, the new publicservice theory, the theory of fiscal decentralization and institutional economics theory.Base on the efficiency of providing public goods, the central government don’t have thecomplete information, central government can’t provide local public goods in effect,local government provide local public goods is more effective in using socialresources, reducing wasting social utility; From the point of fiscal decentralizationtheory, fiscal decentralization, local governments should be allocated to the powers offinancial to provide the public goods,which match to powers of work, lacking of thepowers of issuing debt should reduce local governments’ providing public goodsservices. The new public service theory emphasizes local government agencies should change the type of control--oriented government turned into a service-orientedgovernment, focusing on people-oriented, service-oriented government. People injurisdiction whose demand should be satisfied and the local government provide moreand better public goods. Institutional Economics theory is that once the model of localgovernment financing determined, no matter good or bad the mode will continue toself-reinforcing and difficult to change in the future, this effect is called "path selection".So design the legal and high efficiency local government financing played a tremendousrole for the healthy development of local government finance in the future. The issuanceof local government bonds replaced by the violation of the local government financingplatforms, disguised debt issuance and other means is necessary for the healthydevelopment of local government financing. Secondly, come to the difficulties faced byChina’s local government bonds of China from the early20th century when China’slocal government bonds born to the status quo of China’s local government bondsissued in2012, including:1.local government bond issuance amount is relatively small,unable to form an effective trading volume in the secondary market which resulting inthe secondary market upset;2.local government bonds, known as the "silver edge bond"risk should be higher than treasury bonds, but the local government bond interest rateseven lower than the same period in treasury bonds, which can not be effective inattracting the investor;3. unsound information disclosure mechanism in localgovernment bonds make investors can not get the information of local governmentbonds effectively, the public can not effectively monitor the direction of the bond funds.Analysis of the economic effects of the issuance of local government bonds, Firstly, onthe issue of government bonds can allocate the resources of public sector has owned,allocate the regional resource, allocate resources between the various departments;secondly,analysis status quo of the direction of using the funds of local governmentbonds, come to local government bonds can improve the local public goods; thirdly, theissue local government bonds to stabilize the economy and promote economic growth;Finally, the reduction in fiscal gap role of local government bonds. Finally, the use ofthe spatial dimension of comparative analysis, drawing on the summary of theexperience of the developed countries of the United States, Australia and Japan, thethree highly developed local government bonds, come to the conclusion of the systemof local government bonds and supporting measures, including the institution of localgovernment bonds,amout of local government bonds, interest rates of t local government bonds.Process control risk is divided into pre-control, In-process controland Post-action control. Pre-control consist primarily of the issuance of bonds forapproval mechanism, the performance evaluation of officials mode, the introduction ofthe rating mechanism. In-process control, including: the establishment of an informationdisclosure mechanism, set up the regulatory authorities; Post-action control, including:the establishment of a sinking fund and purchase insurance for local government bondsto increase level of credit.China’s local government bonds is still in its infancy, there are still a lot of placesthat need to be refined and improved. Also current local government bond issuanceamount is small, but with the Tax Sparing System Reform in depth, local governmentbonds would account for a greater proportion of fiscal revenue and expenditure in thefuture. With experimental work of issuing bonds by themselves ongoing, the perid ofthe bonds and the amount of the bonds are increasing, issuing work has become moresmooth and accumulate experience for future provincial and municipal localgovernment itself to issue bonds, and gradually expand the scope of its own to issuebonds to give the local development, and ultimately get ready to the revenue-sharingsystem claims.In summary, China’s local government bonds’ way is not easy, this way shouldconstantly explore in the central government and local governments constantly running,the local government and the public is constantly running, and China’s local governmentbonds will eventually improved in practice.