The Research Of The US Local Government Debt Management

US local governments have issued municipal bonds for a long time, which is theworld’s first local government who issued bonds. The United States’ Constitutionclearly gives the rights and responsibilities of all levels of government, to allow themto issue bonds. Municipal bonds have become an important financing tool foreconomic development in the US local governments, not only ease the pressure onlocal government finances, but also effectively promote economic development. USlocal governments have mature experience to issue municipal bonds, which have amore scientific management methods and risk control measures.At present, China’s local governments have just issued bonds by themselves andare lack of relevant experience. We can learn from American experience and lessonsof local government debt management. This paper analyzes and studies the US localgovernment debt issuance and management, and make recommendations for thefuture of China’s bond market according to the current debt situation. This paper isdivided into six sections.Chapter I is the introduction, mainly analyzes the research background andsignificance of studying US municipal bonds. In this chapter, there’s also introductionof relevant research results at home and abroad.Chapter II introduces the US local government bonds’ definition, classificationand characteristics. US municipal bonds are divided into general obligation bonds andrevenue bonds. In addition, there are other categories of US municipal bonds. USmunicipal bonds have tax breaks, good credit, high rates and strong liquidity.Chapter III introduces the issuance and management of US local governmentbonds. US authorities set up special offices OMS and MSRB to make policy andinformation disclosure system.Chapter IV analyzes the mechanism in the United States to prevent and controlrisk, and the method to resolve debt crisis. US local governments have a more scientific approach. It is necessary to have legal opinion and credit rating fromauthorities before issuance. In response to crises of municipal bonds, US localgovernments issue bond with insurance to improve credit rating, the US governmentalso established a debt service reserve in order to deal with the debt default.Meanwhile, the United States also attaches great importance to the establishment oflocal government debt risk warning system.Chapter V analyzes the characteristics and problems of the US local debtmanagement. US debt management mixes a market constraints and institutionalconstraints mode. Superficially, the main reason of the bond default is the localgovernment fiscal income over expenditure. However, the root cause of localgovernment debt default is improper hard budget constraints and vulnerabilities of theway to make up for the deficit.Chapter VI puts forward policy recommendations to China according to analysisof the US local government debt and the current situation of China’s local governmentdebt. In2009, the State Council allowed the Ministry of Finance to issue localgovernment bonds in represent of agents of all provinces, autonomous regions,municipalities and cities. In2011and2014, the notices allow10local governments toissue bonds now. Obviously, it is not long for China to issue local government bonds.China is lack of relevant experience. Although some local governments have issuedlocal debt repayment plan and managed the relevant laws and regulations andgradually developed credit rating, it is undeniable that China’s local government debtburden is too heavy and has greater risk. Therefore, China’s local government debtrequires sound special laws and regulations, the establishment of regulatory agencies,and to increase the level of credit rating to build system from bond issuance to riskcontrol.