The tax-free three-year bonds, to be sold from July 1 to 15, would bear an annual coupon of 3.14 percent, the ministry said in a statement published on its Web site (www.mof.gov.cn).

The coupon compares with 3.24 percent for three-year fixed yuan deposits, but interest from the savings bonds is not subject to the 20 percent income tax for bank savings.

The non-tradable bonds would be sold through a pilot computer system linking big commercial banks to allow individuals to purchase, manage and redeem the forthcoming savings bonds electronically, the ministry said.

The banks involved were Bank of China Ltd. , China Construction Bank Corp. , Industrial and Commercial Bank of China [ICBC.UL], Agricultural Bank of China [ABC.UL], Bank of Communications Co. Ltd. , China Merchants Bank Co. Ltd. and Bank of Beijing, it said.

Chinese citizens hold $1.8 trillion yuan in bank deposits, due in part to an underdeveloped social welfare system that pushes many to save for medical care and old age.

But they are largely forbidden from investing outside China, and their domestic options are limited to savings accounts and stock, bond and real estate purchases.

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