SHANGHAI, Sept 13: The local government of China’s eastern province of Zhejiang will auction 87 billion yuan ($13.7 million) of five- and seven-year bonds on Sept. 21 within a central government quota, it said on Thursday.
The bonds, divided evenly between the two tenors, will be priced by Dutch auction issued from Sept. 24 to 26, the provincial government said in a statement published on the website for China’s major bond issues, www.Chinabond.Com.Cn.
The Ministry of Finance has set a quota of 250 billion yuan for local government bond issues this year, up from 200 billion last year. Four wealthy regional governments—Shanghai, Shenzhen, Guangdong and Zhejiang—are from time to time permitted to issue bonds directly.
This year, Shanghai and Guangdong have already issued local government bonds under the pilot programme.
Municipal authorities are barred by law from borrowing directly from markets, but nevertheless amassed a mountain of debt via financing vehicles under Beijing’s stimulus package during the global financial crisis.
Local governments accumulated 10.7 trillion yuan in debt as of the end of 2010. The government expects as much as 3.5 trillion yuan to turn sour, while Standard & Poor’s reckons it could be as much as 9 trillion yuan, raising concerns about defaults and their potential impact on the banking system. (AGENCIES)
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