China plans to issue its first dollar bond since October 2004. Photo: iStock

China’s planned US$2 billion first sovereign bond was not created for the purpose of financing but for covering government spending, say officials from the Finance Ministry, China News Service reported.

It is the first time since 2004 that the government planned to issue sovereign bonds to international investors.

The move is aimed at promoting the opening of China’s finance industry, to help set up the pricing benchmark of foreign currency bonds and to optimize government debt structure.

The move is also seen as encouraging international investors’ understanding of the Chinese economy, the report said.

However, many investors think the distribution scale is a bit smaller than they expected.

The official response to that is that financing is not the primary purpose of the bond issue, thus the government decided to maintain the scale. Also, all funds raised will be used for general government expenditure.