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Shanghai will issue the first government bonds on Tuesday in a pilot program designated to help cash-strapped local governments to curb fast-spreading debt risks. So far, the market reaction seems to be cool, despite some initial interest.
Analysts say the purchasing volume will depend on the interest rate of the new bonds, which is likely to be higher than that of national bonds.
In late October, China’s Ministry of Finance announced that the cities of Shanghai and Shenzhen and the provinces of Zhejiang and Guangdong would be allowed to issue municipal bonds on a trial basis this year as authorities explore ways to solve local governments' debt issues.
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