The move comes amid concerns among global investors about the potential debt load among China's local governments. While Beijing is widely considered to be able to bail out local authorities if their finances hit a rocky point, investors worry that any potential problems could put a strain on the financial system of the world's most reliable growth engine.

    Investors have been growing increasingly concerned over the size of local-government debt—estimated by China's national audit office at the end of December to be 10.7 trillion yuan ($1.68 trillion), equal to 27% of the country's 2010 gross domestic product—and indebted authorities have been under pressure to reduce their obligations. It is unclear how much of the debt is at risk of going bad.

    According to China's current Budget Law, passed in 1994, local governments can't issue bonds directly. The Ministry of Finance has been issuing bonds on their behalf under a program introduced in 2009. The pilot program could open the door for additional funding for local governments, allowing them to roll over debt and meet their obligations.

    China's Ministry of Finance said Thursday the country's cabinet has approved a program to allow some local governments to issue bonds directly, underscoring the central government's wish to provide more financing channels for local authorities.

The provincial governments of Zhejiang and Guangdong and the municipalities of Shanghai and Shenzhen will participate in the trial this year, the ministry said in a statement.

    The move could shine a light on the budget conditions of cities and provinces across the world's No. 2 economy, because bond investors likely would demand detailed financial data.

    The ministry pays the principal and interest on the bonds to investors after the debt matures, and the local governments then repay the ministry.