The funds will be diverted to the country's key firms to reinforce their capacity to improve product quality, increase product variety and expand exports, according to Gan Zhihe, director of the Investment Department of the State Economic and Trade Commission.

Seeking to invigorate its state firms, the central government decided in 1999 to use funds gained by issuing bonds to support the enterprises' technological renovation.

This year, the industries such funds will be channeled to include metallurgy, petrochemicals, textiles and machinery, and to a group of large enterprise groups that have the potential to compete in the global market, according to Gan.

In total, China will issue 150 billion yuan (US$18.1 billion) in treasury bonds this year, Zeng Peiyan, minister of the State Development Planning Commission, announced earlier this month.

Although the funds to be used for technological upgrading in 2001 accounts for only 4.7 percent of the year's total national debt, Gan said he expected the capital will lead to a 10-fold investment into technological renovation projects by banks and enterprises themselves.

Over the past two years, the country has used 19.5 billion yuan (US$2.35 billion) of the funds raised by treasury bond issues to launch 880 technological renovation projects, according to Gan.

Since most of these projects have passed stern feasibility studies and proven to be promising and key to enterprise expansion, some businesses, which had once balked at investing in technology and equipment, took active initiatives in funding the projects, Gan said.

Banks also offered to lend funds to the enterprises with the projects, which they had been reluctant to do before.

As a result, the introduction of 19.5 billion yuan in government funds raised through bond issues into enterprise technological upgrading efforts triggered another 240 billion yuan (US$28.9 billion) of investment from other sources, according to Gan.

This year, along with the 2.7 billion yuan (US$325 million) of surplus renovation funds -- also raised by treasury bond issues -- left over from last year, China is expected to have 9.7 billion yuan (US$1.17 billion) of funds for use in technological upgrading projects, which is expected to stimulate 120 billion yuan (US$14.45 billion) of investment, Gan said.

More than 100 of the 880 projects had been completed by the end of this February, and the remainders are expected to be finished within the coming two years, he said, adding that part of the bond funds will go to these projects.

Thanks to the support of funds raised through bond issues, Gan said the country has been able to implement a host of technological renovation projects that are crucial to producing products that the country would otherwise have to import.

The funds are also important for revitalizing old industrial heavyweights, such as Anshan Steel Co., he said.

(China Daily 03/31/2001)