The Ministry of Finance's recent issue of 45 billion yuan (about HK$41.8 billion) in special bonds to the country's 12 commercial banks will help meet Beijing's 8 per cent economic growth target, official reports say. In March, the central bank cut the reserve requirement of banks from 13 per cent to 8 per cent, giving the banks billions of yuan in new capital. The bond issue allows the ministry to absorb most of that money and use it for domestic investment. A ministry spokesman said the issue was not an increase in the total bond issue and the 45 billion yuan was part of the overall figure given by Finance Minister Liu Zhongli in his March budget speech. Mr Liu said the mainland would issue 280.86 billion yuan in bonds at home and abroad this year to cover the budget deficit and service foreign and domestic debt. 'To ensure the economy grows by 8 per cent this year, it is necessary to take measures to increase investment in infrastructure construction,' the Financial News quoted a spokesman for the Ministry of Finance as saying. 'This requires an increase in public fund-raising, and issuing state debt is one of the effective ways.' With export and consumer demand unable to rise sharply in the short term, an increase in investment in irrigation, transport, real estate, telecommunications and environmental protection projects had became the main engine of growth, he said. The bonds, issued on Monday, carry a seven-year term, 6.8 per cent interest rate, and can be traded in the interbank market, the China Economic Times reported yesterday. They will not be sold to the public. In March, the ministry said it would issue 270 billion yuan in special bonds to the four main state banks to help them meet the capital adequacy ratio set by the Bank of International Settlements (BIS). The 12 new commercial banks, set up in 1987, have healthier balance sheets than the Big Four and do not need to be recapitalised to meet BIS requirements. The issue was not reflationary since it came out of the issue already announced by Mr Liu in March, one western economist said.