China Press Digest: Friday, Nov. 3

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

Friday, Nov. 3

     It is too early to say the current improvement in bank asset quality has

become a trend, though banks have actively shrunk their balance sheets under

stricter regulation, the Financial News, a journal run by the People's Bank of

China, reported Friday. The debt risk has been reduced considering debt defaults

have decreased this year, the report said, adding that as of the end of

September, debt defaults totaled CNY23.68 billion, compared with CNY40.3 billion

for all of 2016. But economic downturn pressures are still large and credit

quality in some regions and sectors could plunge as cuts in overcapacity and new

environmental protection initiatives continue, the report warned. Insufficient

private investment and rising borrowing costs will put further pressure on

corporate debt burdens, the report warned. (Financial News)

     The short-term volatility of the yuan exchange rate will not change its

internationalization trend, the People's Daily reported Friday. The Chinese

government mouthpiece was responding to western media comments on the slowdown

of the currency's internationalization given data from the Society for Worldwide

Interbank Financial Telecommunication (SWIFT) showing the yuan's share of

international payments is now smaller than it was two years ago. From a trade

and investment perspective, the drive for yuan internationalization has never

changed, the newspaper said. The process faces challenges, including maintaining

a stable yuan exchange rate, the current limited ability and relative high cost

of hedging yuan exchange rate risks, and limits at the moment on the amount of

assets priced in yuan, the report admitted. The usage of the yuan in global

markets will increase in the long term as the Chinese economy continues to grow

and the One Belt, One Road initiative is pushed forward, the report stressed.

(People's Daily)

     New commercial bank loans are expected to decline significantly in October

due to further curbs on the property sector and for seasonal reasons, the

Securities Times reported Friday. Since September, authorities have banned the

use of consumer loans for property purchases, in addition to enhancing

punishments for property buyers who fund down payments in an illegal way. This

will contribute to a fall in short-term household loans in October, the report

predicted. Banks have largely used up their credit quotas due to the robust

expansion of new loans in the first nine months of this year, the report noted,

adding as of the end of September, total new loans had reached CNY11.16

trillion, or some 88% of total new loans granted last year. (Securities Times)

     China needs to enhance financial regulation to prevent financial risks from

causing major shocks to the economy, the Economic Information Daily said Friday

in a front page commentary. The regulatory duty shouldered by the central bank

should be emphasized and a "double pillar" management framework combining

monetary policy and macro-prudential policy should be optimized, the commentary

argued. The drafting of appropriate financial laws needs to be accelerated and

corporate governance in financial institutions needs to be strengthened, the

commentary stressed. (Economic Information Daily)

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

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

[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]