SHANGHAI - China's sale of 1.55 trillion yuan ($203.6 billion) in special domestic bonds to finance its fledgling overseas investment agency will be carried out in stages, a senior central bank official said in remarks reported on Monday.

The country's stock market has been hit by the planned bond issue, approved by China's parliament on Friday, as investors fear it will pull funds from the market.

"The plan will be carried out gradually according to its monetary policy," Yi Gang, assistant governor of the People's Bank of China, told the Shanghai Securities News. Yi reiterated the Finance Ministry's view that the bond issue would have only a neutral impact on the domestic economy, the newspaper said.

The Finance Ministry indicated on its Web site on Friday that it would issue the bonds directly to the central bank in exchange for part of the $1.2 trillion in foreign currency reserves under the central bank's control.

No specific timetable was given for the sale of the bonds, but the increase in this year's debt ceiling suggests they will all be issued this year.

The first bonds were reported to be issued this month. 

The English-language newspaper said the sovereign wealth fund would be named China Investment Co. Ltd. and would formally begin operations in September after registering in August.

The directors of the fund will be drawn from government organisations such as the central bank, the ministries of finance and commerce and the National Development and Reform Commission, the paper reported. ($1 = 7.611 yuan)