China's booming city of Shenzhen sold 2.2 billion yuan (Dh1.3 billion) in bonds on Friday, the last of four local governments to sell debt directly to investors in the first phase of a pilot scheme to make municipal fund-raising more market-based.
Beijing hopes the scheme will eventually lead to a proper local government debt market, and prevent the frenzied borrowing of recent years that has alarmed ratings agencies. Some analysts predict a law change in March will allow such a move.
The bond sales, all in richer parts of China, have been well received, although, with the central government explicitly guaranteeing the debt, it remains some way short of a US-style municipal bond market.
"Local government bonds would still be seen as similar to sovereign debt in China, but at least it makes fiscal spending more transparent and reduces local governments' reliance on commercial banks," said Standard Chartered economist Li Wei.
"A bigger debt market is better than a bigger bank lending market, as it's more liquid and helps investors better allocate their assets."
Shenzhen, a manufacturing hub on China's econ-omically vibrant southern coast bordering Hong Kong, auctioned 1.1 billion yuan in three-year bonds at a yield of 3.03 per cent, and 1.1 billion yuan in five-year bonds at 3.25 per cent, traders said