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China will broaden the market for domestic yuan-denominated bonds following two pilot issues floated in October, an official newspaper reported on Thursday.

The China Securities Journal, quoting an unidentified source at the Ministry of Finance, gave no details. But it said international institutions, multinational companies and foreign governments, including Japan, were keen to issue "panda bonds".

"There are many foreign institutions and governments that want to issue renminbi bonds in China," the paper quoted the official as saying.

The Asian Development Bank and the International Finance Corp., an arm of the World Bank, opened the market in October with issues of 1 billion yuan and 1.13 billion yuan, respectively.

The official said selling panda bonds would make sense for Japan because it could pass the proceeds along to Japanese firms in China that need yuan funds for investment purposes.

The launch of panda bonds was one of the main innovations in China's fixed-income markets in 2005.

Another was the start of securitisation, with three pilot issues by telecoms firm China Unicom Ltd. , China Construction Bank Corp. and China Development Bank.

The head of one of the four debt-clearing firms set up to take non-performing loans off the books of China's Big Four banks, said it was vital to extend securitisation into the area of bad assets.

"It is practical, indeed a must, for asset management companies to securitise bad assets," Mei Xingbao, head of Orient Asset Management Co, wrote in the Financial News newspaper.