SHANGHAI, Nov 5: The Shenzhen city government said on Monday it will auction 1.8 billion yuan ($295.11 million) of five-year bonds and 1.8 billion yuan of seven-year bonds on Nov. 8.
The announcement was published on the website of China’s main bond clearinghouse, www.Chinabond.Com.Cn.
The finance ministry said in March that it would raise the quota for direct issuance of local government debt to 350 billion yuan for 2013, up from 250 billion yuan in 2012, under a pilot project launched in 2011. The quota includes both independent auctions and auctions in which the finance ministry sells bonds on behalf of localities.
Municipal and provincial governments are currently not allowed to raise funds in the debt market directly outside this pilot.
Since 2009, however, local governments have increasingly evaded this restriction by borrowing through state-owned investment companies known as local-government financing vehicles. Such borrowing is technically corporate debt but is widely understood to carry an implicit government guarantee.
The pilot project for direct bond issuance is an effort to make local government debt issuance more transparent.
In July, the finance ministry announced that it was adding Shandong and Jiangsu provinces to the group of local governments permitted to issue bonds independently, bringing the total number of localities to six. ($1 = 6.0995 Chinese yuan) (agencies)
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