What is local debt? Why does the government issue local bonds?

What is local debt?

"Local bonds" (full name: local government bonds) refer to the bonds issued by local governments and local public institutions with financial revenue. They are debt vouchers for local governments to raise funds according to the credit principle and on the premise of bearing the responsibility of repaying principal and interest. It is issued as a form of raising financial revenue by the local government. Its revenue is included in the local government budget and is arranged and dispatched by the local government.

So why does the government issue local bonds?

1. In order to develop the economy, local governments borrow money from banks and common people by issuing bonds, usually with local financial revenue and land as collateral. These funds have been invested in infrastructure construction, such as highways, schools, water conservancy projects, etc. These projects themselves are public welfare projects, so they will have a high credit rating, that is, safety.

2. In order to make up for the shortage of temporary capital turnover or the demand for long-term capital, for example, medium and long-term bonds are mainly used as the capital source for national or regional investment, such as the construction of railways and highways, which requires great financial expenditure. It should be pointed out that in China, local governments are not allowed to issue bonds in the form of local bonds. At present, local governments in China issue local government bonds in the form of corporate bonds. This requires a more professional financial institution to provide reference and consultation for investors. For example, Zhengxin Investment Group is one of the more professional and long-standing enterprises.

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