Investors queued for hours to gain a piece of the 60 billion yuan (US$7.25 billion) pie the government is offering this year.

Bond mania has been a common occurrence in recent years in China.

"It shows that government bonds still have a good reputation with millions of Chinese grassroots investors and that they have faith in the bonds," said Wang Mingshan, a lawmaker with the Ninth National People's Congress (NPC).

"But on the other hand, the move also shows that investors still lack better investment alternatives for stable returns," said Wang, who raised a proposal for the development of State bonds law to streamline bond concerns.

Bonds have been China's economic growth lifeboat for the past several years.

On the central government's agenda is the issuance of 592.9 billion (US$71.58 billion) in State bonds to finance its economy this year. However experts warn that boosting an economic upswing through heavy government spending could be hazardous if there are not enough back-up measures to encourage private funding.

"Only a simultaneous increase of public and private investment lead to healthy growth of China's economy," said Dong Fureng, an expert at Peking University.

But private spending is still weak compared with the enormous long-term 510 billion yuan (US$ 61.66 billion) in State bonds issued in the past four years to help build infrastructure in the country.

Statistics show that individual savings deposits have reached a historical high of 7.8 trillion yuan (US$ 942 billion) as of February, but most of the money has lain idle for years in banks.

"Government spending must run parallel with increasing private investment, without which the repayment of the funds could lead to possible financial risks in the future," warned Dong.

"The government should work out a package with matching policies, such as tax cuts and easier investment access, to stimulate private investment," said Zhao Yu, an NPC member from South China's Yunnan Province.

The social welfare system should be strengthened to better shelter investors and to spark confidence in consumption, said Dong.

China's financial deficit will hit a record 300 billion yuan (US$37.46 billion) this year, and the country will issue another 150 billion yuan (US$18.13 billion) in special State bonds to stimulate economic growth this year, sparking rising fear of possible financial problems in the coming years.

Reacting to the panic, Dai Xianglong, governor of China's central bank, said the deficit is still far from the internationally accepted limit even when taking into account other hidden debts, including the mammoth non-performing assets accumulated in past decades by State-owned commercial banks, debts from local governments, and depleted social welfare accounts.

However, Wang still believes there should be stronger governance of bond issues in the areas of planning, issuing, management supervision and auditing.

The State bonds should also be flooded more to poor provinces and rural areas, said Wang, who served as the director of the Jiangxi provincial development commission for ten years.

He also called for a strict auditing system to ensure public access to information and to stop corruption.

(China Daily March 15, 2002)