China looks to individual retail investors to raise local construction funds amid economic slowdown
- Pilot programme launched in Ningbo, Sichuan, Zhejiang, Shanxi, Shandong and Beijing to sell local government bonds at bank counters and via internet banking
- Port city of Ningbo sells 300 million yuan (US$45 million) on Monday, with annual interest rate for the three-year bond set at 3.04 per cent
China’s pilot bond sales programme aimed at raising construction funds to aide the slowing economy enjoyed an impressive start as the first batch worth 300 million yuan (US$45 million) sold out quickly in the port city of Ningbo on Monday.
A total of six provinces and cities – Ningbo, Sichuan, Zhejiang, Shanxi, Shandong and Beijing – have been chosen to test the scheme which will see local government bonds sold to individuals at bank counters and via internet banking.
The annual interest rate of Ningbo’s three-year bond, which will be used to fund the city’s land reserve, was set at 3.04 per cent, higher than the three-year benchmark deposit rate of 2.75 per cent. It also received the highest rating of AAA, which is the same as Treasury bonds issued by the central government.
Financial regulators lowered the investment threshold to 100 yuan while also offering a tax exemption on interest revenues to attract customers.
It will broaden the sales channels of local bonds. Investors can enjoy stable interest revenues and support the construction of their hometowns.
“It will broaden the sales channels of local bonds,” the Ministry of Finance said on Monday. “Investors can enjoy stable interest revenues and support the construction of their hometowns.”
Previously, local government bonds were mainly sold at interbank markets or exchanges, with financial institutions or corporate clients the major buyers.