Economic Effects And Risk Management Of Municipal Bonds

With the continuous development of economic and social, China’s urbanization process is showing a trend of accelerated development. The requirements to infrastructure of the scale, quality and efficiency are also getting higher and higher, municipal construction funding needs has become particularly urgent.Many local government established a large number of debt platform to raise funds for construction, according to the Audit Commission report against the national debt audit showed that as at the June of 2013, the total of local debt has reached 17.8909 trillion yuan, local government debt has become China’s most serious public agencies, local governments consider issuing municipal bonds for urban infrastructure in this context, to ease the financial tension, stimulate domestic demand, promote the city’s sustained and rapid development has great significance, how to develop the municipal bond market is an important issue to be discussed in this article.This article is based on China’s specific national conditions, take a method of combine systematic analysis and case analysis, trying to build a convincing theoretical framework, give a scientific and rational assessment to local government bonds, analysis risk management issues about municipal bond financing, and then make policy recommendations to achieve local government municipal bond market healthy and sustainable development, provide valuable information for government departments.In this paper, the structural arrangement can be divided into five parts. Background and Significance has been introduced abbreviated in the first chapter, as well as domestic and foreign theoretical research and innovation and inadequate review of this article. The second chapter mainly describes the basic theory of municipal bonds, including the definition and historical evolution, analyze the causes of municipal bond issuance, and to explore the optimal mode of issuance. The third chapter analyzed the economic effects of municipal bonds from the two aspect of positive effects and the negative effects.The fourth chapter analyzes the management of risk and the scale of the municipal bond issuance of municipal bonds is too much risk, and in Zhejiang Province, the use of KMV model to predict the scale of municipal bonds issued under the no credit risk. The fifth chapter put forward policy recommendations from local governments and the central government’s own management of macro-control risk both for the previous chapter.Along the process of logical analysis, this paper got the following main conclusions:(1)With the background of the huge funding gap and existing financing limitations in the implementation of the urbanization process,it’s a trend to allow local governments issue municipal bonds.(2) At this stage, Zhejiang Province should issue general obligation bonds in "issued and repay all by themselves" form above the supervision of central government.(3) The management of municipal bonds also has many risks, with particular attention to the issue scale is too large to bring credit risk.(4) At present, Zhejiang Province’s municipal bonds issued for a period of no matter how long, reasonable basic issue scale should be limited less than 92% of the guarantee revenue. Finally point out that there have two ways to improve the municipal bond market. The first is to strengthen the local government’s own management, such as the establishment of a credit rating system, improve the information disclosure system, municipal bonds included in the budget revenue and expenditure management; second is to proceed the central government macro-control, such as strengthening the supervision of municipal bonds, the macro-control economic structure, the implementation of debt replacement plans and change the way of economic development.