Mainland financial institutions have been given approval to increase issues of overseas bonds for the first time in two years, according to officials. The State Development Bank is set to launch a US$350 million issue of Yankee bonds. The Bank of China is also planning an issue. Total borrowings in foreign markets from all sources is expected to top $18 billion this year. According to the China Daily Business Weekly, all major Chinese state banks will be encouraged to turn to international capital markets. The paper said the funds raised would be used to help finance massive infrastructure projects. Lehman Brothers and J P Morgan will serve as the lead underwriters for the State Development Bank's note offering, the paper said. Economists believe the push for capital heralds a relaxation in controls of overseas debt issues following plans to boost the economic growth this year after more than three years of austerity measures. The State Planning Commission, which sets annual quotas on foreign exchange borrowings, has said China planned to increase its foreign borrowing including bank loans and debt issues by $7 billion to $18 billion this year. Last year, Chinese financial institutions raised $1.81 billion through issues of overseas bonds. An official at the State Administration of Foreign Exchange said rising yields made it favourable to issue bonds. He said the Bank of China had already applied to issue overseas bonds, but did not give further details. Other major state banks, the China Construction Bank, the Agricultural Bank of China and the Industrial and Commercial Bank of China, would also 'make a presence abroad', he said. China would focus its debt issues in Tokyo although institutions were also seeking to enter the Hong Kong, Singapore, United States and European markets, he said. For the past three years, China has tightened its overseas debt issues partly due to the soaring foreign debts which had reached more than $100 billion by the end of last year. They were also restricted because of the three-year austerity programme which clamped down on new construction projects. The official said China should issue debt in line with its foreign exchange earnings to prevent losses from fluctuations in exchange rates. He said China was short of funds despite foreign reserves exceeding $105 billion. The mainland maintained a high level of reserves because of its high volume of imports and huge foreign debt, he said.