The bonds will stop being issued on April 9 and will consist of 36 billion yuan (US$4.3 billion) in three-year bonds and 24 billion yuan (US$2.9 billion) in five-year bonds.

The interest rate for the three-year bonds will be 2.42 per cent per year and that for the five-year bonds will be 2.79 per cent. This compares with a rate of 2.52 per cent for a three-year renminbi savings account and 2.79 per cent for a five-year account. It marks the first time in the history of China's treasury bonds that any of the bond rates has been lower than the rate for a savings account.

Analysts said this suggests that China's treasury bonds have become more market-orientated and close to international practice.

An economist surnamed Niu with the State Information Centre said: "It also suggests that the Ministry of Finance is trying to regulate the market interest rate."

China has issued 510 billion yuan (US$61 billion) in special long-term bonds over the last four years to fund State spending on infrastructure and to support economic growth.

Four years of practice have shown that State bond investment is good for the country and good for the people, Niu said.

Bond investment added 1.5 percentage points to economic growth in 1998, two percentage points in 1999, 1.7 percentage points in 2000 and 1.8 percentage points in 2001.

China's economy grew by 7.3 per cent in 2001 over the previous year and is forecast to expand by around 7 per cent this year.

In the short term, the bond issue will spur domestic investment and consumer demand, setting down a good base for long-term economic development, Niu said.

On Tuesday, Premier Zhu Rongji announced that the government will issue 150 billion yuan (US$18 billion) in treasury bonds this year, with the purpose of "maintaining the necessary level of investment from treasury bonds to stimulate a relatively rapid growth of fixed-asset investment."

He said: "In light of the needs and possibilities, we plan to issue 150 billion yuan (US$18 billion) in long-term treasury bonds for construction in 2002."

(China Daily March 7, 2002)