The mainland's biggest steel producer is close to obtaining approval to become the first state-backed group to directly tap the international bond market, sources said. Baoshan Iron and Steel - commonly known as Baogang - is understood to be looking at raising between US$200 million and $300 million through a Eurobond issue of at least three years' maturity. 'Yes, we have been laying the groundwork for an overseas bond issue, but I am not certain formal approval has been received,' a Baogang official said. Until now, Beijing allowed only 'window companies' - such as approved provincial and national investment and trust companies - to tap the international debt markets directly. Analysts said Baogang's proposed exercise was aimed at getting big enterprise groups to familiarise themselves with the workings of the international financial market rather than actually raising funds for their operations. ING Barings' Shanghai head, Hoong Yikluen, said: 'Baogang does not actually need the money as it is quite cash rich, but it will give the group exposure in the international financial arena.' Although still the mainland's most profitable steel manufacturer, Baogang saw its pre-tax profits dip 37 per cent last year amid rising energy costs and increasing domestic supply. The steel-maker's planned move tied in with an announcement two days ago by the State Administration of Exchange Control (SAEC) that it would allow a handful of well-run enterprise groups to raise short-term debt in international markets. The SAEC would impose strict controls on the overall size of short-term debts that could be raised abroad to stave off any potential problems caused by over-exposure of an economy to overseas borrowing. Tang Xu, director of the Graduate School of the People's Bank of China, said: 'There have to be tight controls, as over-reliance of short-term international debts was a cause of the financial turmoil gripping several Asian countries.' He was surprised the SAEC considered the move. The mainland has a short-term debt of $118.6 million, accounting for less than 12 per cent of total foreign debt. Vice-Minister of Finance Liu Jibin said the country, drawing lessons from the financial crisis, would be cautious and prudent in external borrowings this year. The country's debt-service ratio - the ratio of annual repayment of principal and interest on debt to foreign exchange earnings - stands at 11.8 per cent, against the generally accepted international standard of 20 per cent. Its debt ratio, or the sum of the outstanding value of a country's foreign debt divided by its gross domestic product, is at a prudent level of 14 per cent.