In China's first local government bond sale, the Xinjiang Uygur Autonomous Region will issue 3 billion yuan (US$439 million) of bonds to finance the country's 4-trillion-yuan stimulus package.

The Ministry of Finance will auction the three-year bonds on behalf of the region on Friday, it said in a notice on Monday. The bonds will be issued between next Monday and April 1, and trading in the secondary market will start on April 3.

The regional government said on its Website that the raised funds will be used to reinforce schools and hospitals against earthquake, build roads, renovate old districts and construct low-rent homes.

Local governments were previously banned from issuing bonds but the ongoing global financial crisis forced the policy makers to carry out proactive fiscal policies, such as local bond sales, to boost domestic demand and increase investments in public facilities.

Of the 4-trillion-yuan plan, the central government will fund only 1.18 trillion yuan and the remaining money will come from local governments, policy loans and corporate bonds.

In addition, the State Council, China's Cabinet, will allow local governments to issue 200 billion yuan worth of government bonds through the finance ministry, which will go into provincial budgets. The funds will be used to build affordable homes, rural infrastructure, health care system, and rebuild earthquake-hit regions, the ministry said.

The central government has allocated for a deficit of 750 billion yuan this year, a rise of 570 billion yuan from last year.

(Shanghai Daily March 25, 2009)