Four local governments in China have been given approval to issue their own bonds, a move which is expected to ease their financial strains and curb fast-spreading debt risks.

The State Council, or Cabinet, has allowed the cities of Shanghai and Shenzhen and the provinces of Zhejiang and Guangdong to conduct the pilot program in 2011, the Ministry of Finance (MOF) said Thursday on its website.

It is the first time that local governments have been allowed to issue bonds. Previously, the central government floated the bonds on behalf of local authorities.

The nation's auditing agency said earlier this year that local government debt totaled about 10.7 trillion yuan at the end of last year.

In early September, Fitch Ratings, one of the world's three biggest ratings agencies, said that it may downgrade China's credit rating within two years as the country's banks struggle with debt loads following a lending surge to help lift the economy during the financial crisis.

According to the new regulations, the four issuers are required to sell three-year and five-year bonds, with each taking 50 percent of their approved auction quotas.

As for the repayment of their future local government bonds, MOF will still act as the agent to pay off the principal and interest of the local government bonds.

Liu Mingkang, chairman of the China Banking Regulatory Commission (CBRC), said Wednesday that local government debt risks are generally under control given that the scale of the debt, the debt structure, and repayment capabilities are all pointing toward a positive outlook.

He said that the 10.7 trillion yuan of local government debt accounted for only 26.9 percent of GDP in 2010, while the outstanding central government debt accounted for 17 percent.