The Ministry of Finance on Friday invited both institutional and individual investors to bid for the 16 billion yuan (US$1.9 billion) worth of 20-year treasury bonds on the country's stock exchanges in Shanghai and Shenzhen.

It is the second time that the finance ministry issued long-term (more than 10 years) treasury bonds since the founding of new China, following the issuance of 12 billion yuan (US$1.4 billion) worth of 15-year bond on June 6 this year.

Dong Chen, a senior analyst with China Securities, said China's bond market previously lacks both short-term (less than one year) and long-term treasury bonds.

On the other hand, the country depends heavily on treasury bonds as it continues to employ a pro-active fiscal policy to fuel its economy.

``The proactive monetary policy will continue at least three years, although many economists said China should adjust its present fiscal policy,'' Dong said.

China needs to better design its treasury bonds mix, he said, adding financial experts have already called for issuance of short-term bonds.

The short-term bonds are beneficial to increasing liquidity of the bonds market while the long-term bonds can help avoid the peak time of repaying the debt, he said.

The issuance of more long-term treasury bonds will be helpful to alleviating the debt burden and improving the country's debt structure, said a research fellow surnamed Zhang with the Development Research Center under the State Council.

The issuance of long-term bonds suggests an improved financial regulatory ability of the Chinese government, he said.

The issuance will be a strong financial guarantee for solutions to major problems in China such as social welfare system building and state-owned share reduction, he said.

An earlier report said China issued 360 billion yuan (US$43.5 billion) in treasury bonds between 1998 and 2000, most of which carried terms between 1 and 10 years.

The money was used to support farming and forestry, water conservancy, urban infrastructure, power grids, national grain depots and urban housing projects for low-income residents.

``The government has allotted 61 per cent of national bonds to western and central regions to boost development there,'' according to Zeng Peiyan, minister of the State Development Planning Commission.

Statistics show money from the treasury bonds flowed into 6,220 projects, drawing total investment of 2,400 billion yuan (US$289.9 billion) during the 1998-2000 period.

The treasury bonds contributed 1.7 percentage points to the country's economic growth rate in 2000, compared to 1.5 in 1998 and 2 in 1999, Zeng said.

(Chinadaily.com.cn 07/27/2001)