Study of Local Government Bonds Reform in China by China's Economy & Policy-Gateway International Group21 Feb 2012 • by Natalie Aster
In recent years, the issue of local government debt in China has grown into a major domestic and international concern, becoming a focus for research at the theoretical and policy-making levels. In fact, the proposal to grant debt autonomy to local governments through amendments to the Budget Act was again on the agenda at the end of 2011. In the long run, allowing local governments to issue bonds, similar to the municipal bonds in the Western market economy countries, is consistent with the direction of the fiscal, taxation, and financial systems. The significance of this issue will be analyzed in this article.
According to the report “Promoting the Reform of Local Government Bonds in China” by China's Economy & Policy-Gateway International Group, in October 2011, the Ministry of Finance allowed the City of Shanghai, Zhejiang Province, Guangdong Province, and the City of Shenzhen to carry out pilot projects whereby these local governments could issue their own bonds, although the amount to be issued still had to be approved by the central government, and the Ministry of Finance was committed to repay capital with interest. Compared with local government bonds issued within the previous three years, the only difference was that these local governments acted on their own in issuing bonds. Although the existing local government bonds are not standard municipal bonds, it means that financial reforms are beginning to be enhanced. In this paper, the fiscal and financial aspects of this development will be analyzed.
Promoting the Reform of Local Government Bonds in China
Published: January, 2012
Price: US$ 200,00
As a means of providing sustainable support for local governments in performing their public responsibilities, promoting the pilot project and policy reforms regarding local government bonds is of great fiscal significance, and is also conducive to changing the widely-criticized “land finance” policies.
Due to the considerable controversy between statistical requirements and criteria, it is difficult to accurately estimate the local government debt balance, but its size has undoubtedly become an important part of the overall government debt structure.
More information can be found in the report “Promoting the Reform of Local Government Bonds in China” by China's Economy & Policy-Gateway International Group.
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