The National Development and Reform Commission, the nation’s top economic planner, said on Aug 5 that it will come out with more initiatives to develop the debt market, particularly to boost funding for infrastructure projects and stabilize the overall economy.

The NDRC will soon permit two policy banks to fund big ticket infrastructure projects through bond issues, but it was yet to finalize the details, said sources close to the issue.

The bonds will be issued by the China Development Bank Corp and the Agricultural Development Bank of China and the debt will be purchased by the Postal Savings Bank of China. The central government is likely to subsidize 90 percent of the interest on the securities, they said.

“It is the first time that the NDRC is adopting such financial instruments to raise capital for infrastructure projects by working closely with financial institutions,” said Zhang Hanya, president of the Investment Association of China.

The interbank bond issuance arrangement seeks to provide ongoing funding support to key projects promoted by the government and to ensure that there are no hitches in raising follow-up funds, amid the financing plight faced by several local governments, he said.

About 22 sectors will be involved in the bond issuance, including the urban rail transit system, railway projects in central and western China and competitive manufacturing industries, which are quite consistent with key projects promoted by the regulator since November.

It was reported that the first batch of the bonds could be launched in one month or so. Bloomberg previously reported that the government is planning at least 1 trillion yuan ($161 billion) in bonds to fund construction projects.

Si Zhu, an analyst with BOC International (China) Ltd, said although the scale of the bond issue is sizable, its impact on the market will be limited as it is a targeted issuance.

Moves adopted by authorities including a new round of debt replacement of local governments could bring pressure to the market. Further easing of the fiscal and monetary policies is necessary to bolster the bond market, he said.

Analysts said investment in infrastructure is the buffer that will help the world’s second-largest economy meet its growth target for this year.

Rapid growth of the financial sector, 17.4 percent in the first six months, contributed significantly to China’s 7 percent growth in the first half. However, growth of the sector is expected to slow in the second half on the heels of moves such as suspension of initial public offerings, said a report published by Minsheng Securities Co Ltd.

The latest official manufacturing Purchasing Managers Index indicated a continuing trend of weak demand, while performance of the property sector and exports remains weak.

Qu Hongbin, chief China economist at HSBC Holdings Plc, said in a report that the service industry has maintained its expansion momentum. However, this is not enough to offset the sluggish manufacturing industry. The momentum for overall recovery has turned sluggish and it is necessary to consider more policy loosening, he said.

Traditional tools are not effective and companies still face high costs or barriers in borrowing from commercial banks, said analysts.

Meanwhile, the NDRC said on Aug 5 it would allow the issuance of bonds for individual projects for the first time, another move to develop the country’s debt market.

The new rules aim at expanding the scale of direct funding and let the capital markets play a greater role to serve the real economy, it said.