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Bond sales seen to balloon in Q2

SALES of China's government bonds are expected to surge by more than fivefold in the second quarter of this year to help meet the country's budget deficit.

The Ministry of Finance will sell 500 billion yuan (US$73 billion) to 550 billion yuan of government bonds in the second quarter from 105 billion yuan in the first quarter because of a likely record budget deficit this year, according to a forecast report issued by the National Association of Financial Market Institutional Investors on its Website.

China has projected a record budget deficit of 950 billion yuan for this year after the country unveiled a 4-trillion-yuan stimulus package to boost spending to cushion the impact of the global economic downturn.

The central government will fund 1.18 trillion yuan of the package and provinces will collect 200 billion yuan by issuing government debts by the ministry.

The provincial governments were previously banned from issuing bonds but the ongoing global financial crisis forced policy makers to institute proactive fiscal policies, such as local bond sales, to boost domestic demand and increase investments in public facilities.

The association, which registers debt sales on the interbank market, said provincial governments will sell half of the 200 billion-yuan bonds in the second quarter.

"Fiscal revenues for local governments grew slowly and the weak real estate market cut their earnings from land sales," the report pointed out.


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