2010-07-13 14:33

China's local governments issued a total of 43.8 billion yuan ($6.46 billion) in debts in the first half of this year, down 73.6 percent from a year ago, Beijing News reported Tuesday.

As the plan for this year is 200 billion yuan, local government debt issuance will reach 156.2 billion yuan in the second half, approximately four times the first half, the paper said, citing data from the National Association of Financial Market Institutional Investors.

Local governments issued 165.9 billion yuan in debts in the first half of 2009, reaching a peak after the central government released the economic stimulus plan.

In order to prevent local investment from getting overheated and prepare sufficient funds for the second half, local governments postponed the issuance of debts in the first half of this year. Meanwhile, the Ministry of Finance also replaced the original filing system with stricter examination procedures, bringing the local government debt issuance under better control.

In the past six months, the issuing pace of treasury bonds and local government debts were in accordance with each other, said Zhu Xiaolong, a researcher with the National Association of Financial Market Institutional Investors.

He said treasury bonds worth of 785.7 billion yuan were issued in the first half of this year but the balance only increased by 227 billion yuan, accounting for a quarter of the central government's budget deficit this year. Meanwhile, local governments issued debts of 43.8 billion yuan, accounting for 21.9 percent of this year's plan.

Analysts said as the government and economists agreed that China's economy would rise in the first half this year then slow down, to issue more debts in the second half would help support China's economic development.

Zhu expected the central government to adjust macroeconomic policies in the second half. With stronger stimulus policies, local governments will increase the issuance of debts, Zhu said.

According to statistics from the National Association of Financial Market Institutional Investors, in the first half, treasury bonds issued totaled 785.8 billion yuan, up 15.1 percent year-on-year, and central bank bills issued amounted to 2.99 trillion yuan, a surge of 112.5 percent year-on-year.