The central bank said the latest swap agreement was meant to "boost bilateral trade and direct investment so as to bolster economic growth while providing short-term liquidity to stabilize financial markets."

Analysts said the currency swap deals could not only pave the way for internationalizing the Chinese currency, but also counterbalance the fluctuation of the U.S. dollar in bilateral trade between China and other countries.

Local Bonds Sold

The Central Government is allowing local governments to sell bonds to finance the construction of public facilities-the first of its kind in the country's history.

China hopes to cope with the global economic downturn by aggressively expanding its fiscal deficit. The Ministry of Finance expanded this year's fiscal deficit to 950 billion yuan ($140 billion), about 200 billion yuan ($30 billion) of which is supposed to be collected by local governments.

Xinjiang Uygur Autonomous Region was the first to issue local bonds, which amounted to 3 billion yuan ($440 million). The three-year bonds can be traded publicly from April 3. The yield will be set according to the market.

In Xinjiang, money collected from the bond sale will be used to build and reinforce schools and hospitals, pave roads, revamp older districts, and build affordable and low-rent housing.

Jia Kang, a veteran financial expert at the Ministry of Finance, reiterated the importance of proper supervision regarding the spending of funds and ensuring they are allocated to projects that need them.

Chinese Banks: Looking Good

The Chinese banking sector withstood the sweeping effects of the global financial meltdown with stable growth in 2008, as indicated in their annual reports.

The Industrial and Commercial Bank of China Ltd. (ICBC), the largest bank in the world by market value, posted a 35.2-percent profit increase in 2008 for a total of 111.2 billion yuan ($16 billion), making it the most profitable bank in the world.

ICBC has had six consecutive years of high growth since 2003 with an average annual profit increase of 37.5 percent.

Most Chinese banks have survived the current financial market turmoil, which has hit financial institutions in developed countries hard.

The Bank of China, also one of the "Big Four" state-owned commercial banks, earned $9.4 billion in net profit in 2008, a 14-percent year-on-year increase.

Against the backdrop of the global credit crunch, overseas institutional investors dumped shares of Chinese banks, because they could barely remain solvent due to losses they incurred from their purchase of toxic assets.

But judging from the healthy operation of ICBC, its strategic investor, Goldman Sachs Group Inc., agreed to extend a share lockup agreement, which would have expired in April, for 12 more months, indicating the investment bank's confidence in ICBC.

ICBC President Jiang Jianqing warned of future challenges if the global economic situation continued to worsen. The bank still holds $2.5 billion in mortgage-related assets, which it might have to write off as non-performing loans.