SIX local governments have been authorized to auction deposits directly to investors on a trial basis, the country’s central bank said yesterday.

    The policy statement published on its website confirmed a previous Reuters report to the same effect, based on sources with advance knowledge of the move.

    The People’s Bank of China did not specify which local governments were selected, but sources told Reuters the governments include the cities of Beijing, Shenzhen and Shanghai — the latter of which has already auctioned deposits this year — and the provinces of

    Guangdong, Hubei and Heilongjiang.

    The Shanghai Municipal Government said Feb. 3 it would auction 40 billion yuan (US$6.40 billion) in 6-month deposits the same month. Traders said this was the first such move by a local government in China, although Beijing also allowed a series of small scale municipal bond auctions in 2014, capped at 109.2 billion yuan.

    The Central Government announced a series of fiscal reforms in the second half of 2014 designed to force local governments to borrow more transparently and invest more responsibly.

    “Granting local authorities the power to auction debt in the same way as the Central Government means that China has made a crucial step in letting local governments become financially independent eventually,” said a senior trader at a major State-owned bank in Shanghai.

    (SD-Agencies)