China Plans Bonds for New Agency

BEIJING -- China plans to capitalize its new foreign-exchange-investment agency by issuing a local-currency bond valued at more than $200 billion, clearing a key hurdle for the sovereign-investment fund that will be formally established in coming months. China's Finance Ministry plans to issue 1.55 trillion yuan ($203.5 billion) in tradable bonds with maturities of at least 10 years in order to buy about $200 billion in foreign exchange, the official Xinhua news agency said. The Standing Committee of the National People's Congress began reviewing the proposal yesterday and is likely to approve the plan this week. Economists have said the massive bond issue will boost liquidity in long-term government bonds and build a better yield curve for traders to price debt, helping the country develop its nascent bond market. The new bonds could also serve another useful purpose for China -- draining liquidity from a financial system awash with funds. http://online.wsj.com/article/SB118296411396750299.html?mod=home_whats_news_asia