The country will have to beef up the management of government debt as it plans to issue more treasury bonds in the coming several years, an official with the Ministry of Finance said.

But the government does not have a timetable for the possible move, which would replace the 1992 Treasury Bonds Rule. The official declined to reveal further details to China Daily.

Huang Jinlao, a senior researcher with the Bank of China's International Financial Research Institute, said the government's treasury bond management system needs to be improved.

Presently, treasury bonds are first issued to financial institutions including commercial banks and securities companies, then sold to individuals on the secondary market.

But the bonds cannot meet the demand of individuals, Huang said.

"The treasury bonds should be issued to individuals directly," he said.

The government should also diversify the varieties of treasury bonds by starting to issue short-term bonds, Huang said.

Almost all treasury bonds issued since 1994 have been medium and long-term bonds, he said.

"China needs to better design its treasury bonds mix," he said, adding financial experts have already called for the issuance of short-term bonds.

Dong Chen, a top analyst with China Securities, said long-term bonds can help avoid peak times of debt repayment, but short-term bonds are beneficial as they increase the liquidity of the bond market.

As the country continues its pro-active fiscal policy, the government should consider issuing the short-term bonds, Dong said.

Yu Liegui, a senior official with the Ministry of Finance, said China still has room to issue more treasury bonds in the coming years.

The Chinese economy, which has posted continuous robust growth in the past few years, can bear a relatively high debt burden, said Yu, director of the ministry's economic construction department.

China's fiscal deficit last year only accounted for 3 percent of the nation's fiscal revenue, while debt only accounted for 18.3 percent of income.

Such a proportion is still "within the bearing ability" of the nation's finance if taking China's economic performance in the past few years into consideration, Yu said.

The Ministry of Finance has always paid attention to controlling fiscal risks, he said.

The ministry has adopted and will continue to take a series of measures to prevent fiscal risks.

"We will readjust the structure of the bonds and reduce issuance costs," Yu said.

The government will also readjust fiscal expenditure to include the repayment of interest of the bonds into budgeted expenditure.

"This will ensure the timely repayment of interest," Yu said.

In addition, the government will impose strict supervision on the use of treasury bonds to improve their efficiency.

In the future, more bonds will be used to improve infrastructure in rural areas, promote technical upgrades and support the development of service industries.

(China Daily July 28, 2003)