China plans to allow 10 cities and provinces to sell bonds on their own credit beginning the later part of the year, launching the initial Western-style municipal bonds in the country as it widens the financial choices for local governments.China Daily reported.

According to a knowledgeable source, included in the list are six Chinese provinces, including the affluent Jiangsu, Zhejiang, and Shandong, the southern part of Guangdong, as well as two less-prosperous provinces in the western and central part of the country. The four cities that are allowed to sell their own bonds are Beijing, Shenzhen, Shanghai, as well as another city on the eastern coast of China.

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The source also said that the Chinese central government will broadcast the plan in the later part of the month, and the bonds will probably be released sometime early in July.

Prior to this plan, the local governments are typically not allowed from issuing debt directly because of the apprehension about the rising debt and worries that several local administrations are not capable to manage their own funds.

In 2009, the government started to issue local-government bonds to provide the authorities with more financing options. The Chinese finance ministry had sold all bonds in favor of the local authorities in 2009 as well as 2010.

Beijing began a trial program in 2011 to let several cities and provinces to directly trade bonds, a possible first step to organize the finances of local governments. However, the bonds remained to be supported by the central government since the finance ministry kept on repaying the principal and interest on behalf of the local authorities.

The planned new municipal bonds will be rated and will have higher yields from the investors because the local government will have to repay all the debts on their own.

China is presently revising it law on budget to pave the way for the formal permission to sell the bonds on the municipal and provincial levels.