Study On The Municipal Bond Legal Issues Based On Budget Law

Municipal bond refers to certain financing means applied by local government due to the requirement for alleviating financial deficit on the name of public credit. It is the bond that local government issues the local marketable securities in a public way with the legal procedures to the institutional investors and social individuals, and repays capital and interest in the agreed means. In recent years, as the economic speed decreases in China, and debt of local government is intumescent in size and the repayment risk is obvious. Faced with the pressure of economic downturn and fact that debt of local government was huge, the central government arranged and promoted the introduction of new Budge Law and confirmed the rights and obligations of raising loan by the local government in legal level so as to intensify the risk ability undertaken by local government and stimulate regions to enlarge fundamental investment, and consequently to reduce implicit debt and protect against potential financial risks.Government and researchers have reached an agreement of establishing a comprehensive legal system concerning municipal bonds. researchers have been exploring and laying solid theoretical foundation for the making of laws and regulations. New policies have been issued to coordinate with the implementation of the new Budget law.In the paper, relation between Budge Law and municipal bond was analyzed in the theoretical level at first. Initially, notion of government budget, relation between debt payment and budget management and relation between Budge Law and municipal bond were described; next, theory foundation of issuance of municipal bond was analyzed, and definition and characteristics of municipal bond were identified in accordance with the public goods theory, intergenerational equity theory and fiscal decentralization theory; finally, necessity of issuance of municipal bond was analyzed and requirement was discussed in three aspects including standardizing debt financing behavior of local government, optimizing composition and structure of debt for local government and mismatching debt-period risks.Secondly, Japanese and American municipal bond systems were analyzed in the paper and content used for reference was proposed. Initially, it mainly introduced the approval and consultation mechanism of issuance, scale control mechanism, risk early-warning and financial recombination mechanism of Japanese municipal bond; next, insurance system, supervision and management credit and risk early-warning mechanism of American bond were analyzed; finally, it proposed to learn from sinking fund system, information disclosure system and middle- and long-term budget report system established by both countries.Thirdly, historical development and questions related to issuance of municipal bond in our country were analyzed in the paper. Initially, six issuing models like sharing, collecting, financing, financing platform type, issuing and repaying by central government, self-issuing but repaying by central government and self-issuing and self-repaying which were applied in different historical periods of issuance of municipal bond in our country and their characteristics were analyzed; next, it mainly described four characteristics of the issuance including quota management, period optimization, investment range and change of management and deposit after the implementation of new Budget Law; finally, problems related to the issuance of municipal bond of our country were analyzed, and main reasons for these problems were that: insufficient transparency, immature credit rating system, imperfect budget supervision mechanism, undefined fiscal responsibility division, unsound repayment mechanism and incomplete accountability mechanism.Eventually, approaches that perfecting laws and regulations of municipal bond in our country were put forward in perspective of Budget Law:(1) to complete relevant regulations of budge transparency system of municipal bond, to perfect government comprehensive financial reporting system, to realize that municipal bond would be issued openly and transparently by establishing sustained disclosure system for municipal bond information;(2) to establish credit rating system for local government, make special rating method for municipal bond, perfect rating agency, and determine the tortious liability so as to build credit system for issuance of municipal bond;(3) To perfect budget supervision mechanism for municipal bond and authorize right of independent debt financing by establishing middle- and long-term budget mechanism, and to set up audit and supervision institution of local people's congress and comprehensively manage budget of municipal bond;(4) to determine the financial relation between central and local government, and distinguish boundary between expending responsibility and governance of government, perfect tax law and optimize transfer payment structure;(5) to establish sinking fund system, make bankruptcy law for local government, establish risk early-warning and debt restructuring mechanism, avoid risk of municipal bond;(6) to perfect accountability mechanism of issuance of municipal bond, strengthen legal awareness of leaders and cadres, to found accountability mechanism and make measures on fiscal responsibility list for leaders and cadres, to ensure public right would be effectively performed under the “sun”.With this thesis, the author hopes to help improve the laws concerning the municipal bonds and perfect the managing system.