Zhejiang Province will continue to issue bonds to raise funds to help narrow financing shortfalls for companies amid a bank credit crunch and private lending default crisis.

The province tops China's corporate bond sales this year by raising 20.6 billion yuan (US$3.25 billion) through 19 bond issues by the end of October, the Zhejiang Provincial Development and Reform Commission told Xinhua news agency yesterday.

This year investors have injected 2.2 billion yuan into two bonds that aimed to finance private companies in Zhejiang - unparalleled in the amount raised and the number issued across the country.

The province has raised 67.5 billion yuan in 57 corporate bond sales since 2006. Under its 12th Five-Year Plan from 2011 to 2015, it will expand the structure of the bonds to further diversify its financing sources.

Zhejiang, together with Shanghai, Shenzhen, and Guangdong Province, has been approved by central government to issue municipal bonds on a trial basis.

On the corporate level, state-owned investment companies will use the bonds to fund infrastructure development while private companies will use them to facilitate more industrial upgrading.

For example, privately-held Geely Automobile, which acquired the Swedish brand Volvo for US$ 1.5 billion last year, has raised 1 billion yuan through a corporate bond issued in June to accelerate its core technology development.

China has been tightening policies to curb inflation this year, which has led to the credit crunch for private firms and unintentionally created a boom in private financing.

But the unregulated private lending has heightened fears the province may drive into a debt default crisis.