Nov. 10 (Bloomberg) -- China may sell up to 200 billion yuan ($29.3 billion) of so-called long-term ``construction'' bonds next year to help fund a government spending package, according to an official at the State Information Center.

The bonds, which are issued to fund government investments other than refinancing existing debt, will increase from 30 billion yuan planned for this year, said Fan Jianping, head of the center's Economic Forecast Department in Beijing, which is affiliated with the nation's top planning agency.

China announced a 4 trillion yuan stimulus plan late yesterday to spur expansion in the world's fourth-largest economy, helping sustain global growth as the U.S., Europe and Japan teeter on the brink of recession.

``The government has moved forward some expenditure planned for next year into the fourth quarter, seeking to spark more private investment to curb a further economic slowdown,'' Fan said in an interview. ``As the economy has cooled down, it is good timing for the government to spend on some infrastructure which it hesitated to do previously.''

The additional supply will whet investor demand for fixed- income securities after the central bank reduced issuances of money-market bills from last month to bolster liquidity, said Xu Xiaoqing, a bond analyst at China Investment Corp., the nation's first Sino-foreign investment bank in Beijing. Total government bond sales next year, including new investment funding and existing debt redemption, may increase by about 600 billion yuan in 2008 from this year, said Xing Ziqiang, CICC's economist.

More Measures

China also plans measures to stimulate domestic consumption, which may include raising the minimum tax level on personal income, Fan said. The stimulus package, of which 100 billion yuan is earmarked for this quarter, will go toward low- rent housing, infrastructure in rural areas, roads, railways and airports, according to a government statement on its Web site.

The Ministry of Finance sold 565.8 billion yuan of fixed- income securities this year in the nation's interbank bond market, which included 497.6 billion yuan to redeem outstanding debt, according to data on Chinabond, a Web site run by the nation's biggest debt clearing house.

China's budget deficit may reach more than 1 percent of gross domestic product next year, compared with 0.8 percent in 2007, according to Fan. He said the ratio has declined each year from 2 percent after the Asian financial crisis in 1997.

``Even with this big rise, we are still below the 3 percent international safety line,'' Fan said.

`Moderately Loose' Money

The country's economy expanded 9 percent in the third quarter, the slowest pace in five years, and export orders dropped to the lowest level since 2005. Manufacturing contracted by a record in October and the benchmark stock index has lost 66 percent in 2008.

China's central bank has cut interest rates three times in two months, most recently on Oct. 29, reducing the one-year lending rate by a total of 0.81 percentage point this year to 6.66 percent. It also reduced sales of three-month and one-year bills to every other week, from once a week, leaving more cash in the economy.

``We are using an active fiscal policy and moderately loose monetary policy to boost domestic demand and exports,'' Fan said.

To contact the reporter on this story: Belinda Cao in Beijing at lcao4@bloomberg.net

Last Updated: November 10, 2008 05:37 EST