The World Bank plans to issue yuan-denominated bonds to raise funds for development projects in China, the Japanese daily, Japan's Yomiuri Shimbun said.

The Bank has already begun talks with the government and the People's Bank of China with an aim to start issuing the bonds by December, the newspaper said.

If the plan is carried out, the World Bank will be the first international financial institution to issue such bonds in China, it said.

Beijing has previously allowed neither international financial institutions nor foreign banks to issue yuan-denominated bonds in the country, the daily said.

The Washington-based global financial body is considering raising funds in China for spending on development projects, it said.

Under the plan, the yuan-based bonds will be issued through the International Finance Corporation, an arm of the World Bank that promotes private sector investment in developing countries, it said.

The funds will go to public projects in China and to private firms, as well as being used for technological assistance.

The Bank is negotiating with China on the volume, timing and period for the bonds, which it wants to carry long maturities.

It has so far procured funds mainly in dollars for loans to large projects in China, such as railway construction.

If yuan-denominated bonds are issued, the risk from exchange rate fluctuations is lowered in the event the Chinese government revalues or floats its currency in the future.

The World Bank believes that with the issuance of yuan-based bonds, China will have to strengthen cooperation with Japan, the United States and Europe in trading and investment, which will lead to stabilisation of the international financial market, the daily said.

In addition to the World Bank, the Asian Development Bank is negotiating with the Chinese government on issuing yuan-denominated bonds.

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