''Because of deficits in the past few years, the central Government has accumulated a large amount of debts owed to various state banks,'' an official said.

''Therefore, the financial institutions are unwilling to subscribe for new bonds, which in turn makes it more difficult for the government to raise funds to repay its debt,'' he added.

Sources said the Ministry of Finance was considering deferring repayment of the six billion yuan debt, which falls due this year, to the next fiscal year in view of the poor response by financial institutions to two previous bond issues this year.

However, a director of the Research Institute of Finance and Banking of the People's Bank of China, Mr Qin Chijiang, yesterday warned of the serious consequences of deferring debt repayment.

''Six billion yuan is not a big amount for the country. The postponement of repayment, however, would seriously undermine the credibility of state bonds in future,'' he said.

Mr Qin said China had planned to issue domestic debt of more than 30 billion yuan this year, but so far had met with unsatisfactory response from traditional subscribers.

He believed the lack of enthusiasm might be caused by the postponement of debt repayments to state-run enterprises in 1991.

''After that, state enterprises became hesitant about subscribing for new government bonds,'' he said, adding that other state departments in charge of economic affairs were opposed to the move.

Another reason for the lukewarm response was the low interest rates of the bonds, which made them less attractive than investment in stocks and enterprise bonds.

Soaring prices in urban areas has further reduced interest in government bonds, he added.

China earlier this week announced that prices in 35 major cities had jumped 15.7 per cent in the first quarter over the same period last year.

The general price index for retail goods was up 8.6 per cent nationwide, the highest rate since 1988-89.

This is partly a result of the stimulus budget announced last month at the National People's Congress which envisioned a fiscal deficit of more than 84 billion yuan.

In 1992, domestic debt issues were budgeted at 38 billion yuan, but the target was overshot, hitting 45.5 billion yuan.

There were reports that Beijing would revert to the forced sale of government bonds after a record issue last year flopped on the open market.

Provincial and state-run enterprises would be forced to buy this year's bond issue, worth 39 billion yuan.

But Mr Qin said the Ministry of Finance should not resort to an administrative order to issue new bonds.

''They should try to encourage the people to subscribe for new bonds because the long-term effect of forced sale would be counter-productive,'' he said.