China will "gradually float" its proposed 1.55 trillion yuan
(US$204 billion) in special government bonds to fund the setting up
of a new overseas investment agency, a senior central bank official
said yesterday.
"The central bank will gradually sell the special bonds based on
its monetary policy and the overall stability," Yi Gang, assistant
governor of the People's Bank of China, told the Shanghai
Securities News during a financial forum on Saturday.
Yi comments also indicated that the bonds would be initially
issued by the Ministry of Finance directly to the central bank in
exchange for about US$200 billion in foreign-exchange reserves to
help set up the State Investment Co.
China's top legislature on Friday approved the proposal to sell
the bonds and the finance ministry said the impact of the issuance
on the economy would be "neutral."
Industry analysts attributed the slumps in the yuan-backed
shares last week partly to the news over the bond sale on
investors' jitters that such issues may soak up liquidity for the
stock market.
Yi echoed the view by the finance ministry by saying that the
bond sales won't exert a big impact on the market, according to the
Shanghai Securities News.
The pace of the debt issuance will be controlled to keep "all
aspects steady," the newspaper quoted Yi as saying.
No timetable has been offered yet for the debt sales but market
watchers believed the central bank would float the bonds to
institutional investors in a batch-by-batch manner within the year
after buying them from the finance ministry.
The National People's Congress also on Friday voted to raise the
cap on the amount of outstanding government debt by the end of the
year to 5.34 trillion yuan, from the previously set target of 3.79
trillion yuan.
The finance ministry said that the increase in supply will help
meet the need for treasury bonds from financial institutions
including insurance companies and the social security fund.
(Shanghai Daily July 3, 2007)