China encourages local gov't bond issuance in FTZs

China will encourage local governments to issue bonds in free trade zones (FTZs) in 2017, the Ministry of Finance (MOF) said Tuesday.

Governments of regions where conditions mature can "actively" issue bonds in FTZs, according to a circular released by the MOF.

Local officials were also told to attract more foreign-funded financial institutions to participate in underwriting.

China launched its first FTZ in Shanghai in 2013. In late 2014, Tianjin, Fujian and Guangdong were allowed to set up the second group of FTZs. Another seven were added across the country in August 2016.

To rein in rising debt risks, China overhauled the management of government bonds in 2014, streamlining fund-raising channels for local authorities while putting a cap on annual bond issues.

New local government bonds cannot exceed the annual caps, the MOF said in the circular.

It also encouraged officials to explore services facilitating non-financial institutions and individuals investing in local government bonds.

In 2016, a total of 6 trillion yuan (870 billion U.S. dollars) of local government bonds were issued in China, up from 3.8 trillion yuan in 2015.