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Bonds to back stimulus package jump sharply

CHINA has approved 43 corporate bonds in the first quarter, a sharp rise from the same period last year, to support the massive construction plan under the 4-trillion-yuan (US$585 billion) stimulus package, according to the data released by the depository house for major bonds.

The 43 corporate bonds, of which five were issued by state-owned enterprises administered by the central government, totaled 66.73 billion yuan, the China Government Securities Depository Trust and Clearing Co Ltd said.

In contrast, only 11 such bonds were approved by the National Development and Reform Commission, the approving agency, in the first half of last year.

Experts said more of these bonds were issued to shore up the government's stimulus package, which needed huge sums of money for the massive infrastructure construction and other new projects. Of the total 4-trillion-yuan package, 1.18 trillion yuan is supplied by the central government. The rest will be financed by local governments and private capital.

Considering the huge demand by enterprises, an NDRC official told Shanghai Securities News on Saturday that the agency would launch more corporate bonds to ensure economic growth. He said the NDRC was working overtime to access the stacks of applications. Money raised by the bond issuance should not be used to make risky investment such as in shares, futures and real estate, the official stressed.

Businesses involved in infrastructure, sewage treatment and energy savings projects would be given priority to issue debt, according to the official.

Based on the current momentum, the total sales of corporate bonds would likely top 300 billion yuan this year, an analyst at China Securities Co Ltd told the newspaper.

Though bond sales were less than 70 billion yuan in the quarter, local governments and non-listed firms are willing to lend more. Only 236.7 billion yuan of corporate bonds were issued last year, against 812.5 billion yuan of treasury bonds.


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