China Press Digest: Friday, July 28

     BEIJING (MNI) - The following are highlights from the China press for

Friday, July 28:

     Analysts are predicting that the scale of interbank negotiable certificate

of deposit (NCD) issuance will shrink significantly in the second half, with

profits from NCDs also dropping sharply, the China Securities Journal reported

in a front-page story Friday. Guangdong province's banking regulator fined one

bank CNY2 million for breaking NCD "business operation rules", prompting

discussion and shock in the market, and indicating that regulators will continue

to tighten oversight and levy more fines in the period ahead. An interbank

insider told the newspaper that banking regulators recently examined many

details of his bank's operations. The source said his bank's interbank business

had earned a profit of several hundred million yuan in the past two years

through a branch under the bank's Guangzhou City division, but it would be lucky

to earn a profit of CNY20 million to CNY30 million in the first half of this

year given the tighter regulatory climate. Analysts also told the newspaper the

property market is cooling down and "returning to a reasonable level," so banks'

profits from lending to the sector are also shrinking. (China Securities

Journal)

     Mortgage lending conditions are being tightened for the fourth time this

cycle, as lendera are now increasingly refusing to give discounts below the

benchmark rate set by the People's Bank of China, the Economic Information Daily

reported Friday. According to the newspaper, in most hotspot cities borrowers

are now receiving only small discounts on mortgage rates or no discounts at all.

According to Rong 360, a FinTech company that offers mortgage lending products,

the average mortgage rate in June was 4.89%, 99.7% of the benchmark interest and

3.38% higher m/m. More than 80% of banks no longer offer mortgage rate discounts

and 32 banks increased their mortgage rates in June to 1.05 to 1.2 times the

benchmark interest rate. Analysts predict further tightening is likely to occur,

the newspaper reported. (Economic Information Daily)

     The rapid expansion of non-bank financial institutions has created many

potential risks, so China will tighten regulations to guide them to control

risks and better serve the real economy, the Economic Information Daily said on

its front page Friday. Because of fierce competition, non-bank financial

institutions usually pay more attention to scale than to quality, the newspaper

argued, noting that some insurance companies expanded too quickly by using

highly-leveraged capital, which harmed the real economy. China should learn from

the U.S. experience and consider extending the reserve requirement system to

non-bank financial institutions. (Economic Information Daily)

     U.S. Republican tax reform negotiators announced Thursday that they would

"set aside" the controversial border adjustment tax idea to advance their tax

reform effort. "While we have debated the pro-growth benefits of border (tax)

adjustability, we appreciate that there are many unknowns associated with it and

have decided to set this policy aside in order to advance tax reform," according

to the joint statement from six top House, Senate and White House officials.

China's official Xinhua News Agency reported the dropping of the BAT, which

would have taxed U.S. imports but not exports and which China opposed, but

offered no immediate commentary on the move. The unofficial Wallstreet CN warned

that there still much work to be done on tax reform to reassure an increasingly

skeptical market. "One theory behind the crazy jump in risk assets in the first

half of this year was the confidence the market had in (U.S. President Donald)

Trump's new political agenda, including healthcare reform, tax reform, increased

infrastructure investment and looser regulations. But there is little time left

for Trump from the perspectives of politics, the economy and the market," the

financial news and analysis provider said.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com

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