China Press Digest: Monday, October 30

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

Monday, October 30:

     M2 money supply growth will accelerate back above 10% next year as the

impact of deleveraging declines, Sheng Songcheng, counsellor to the People's

Bank of China, said Saturday at a financial conference in Hangzhou. The

expanding gap between the growth of M2 and total social financing has been due

to financial regulation and deleveraging, Sheng said, explaining the slowdown of

M2 growth resulted from a drop in banks' lending to non-bank institutions. The

yuan exchange rate will fluctuate in a range of 6.5 to 6.6 to the dollar this

year and liquidity will be stable under a tight policy bias, Sheng noted.

Chinese interest rates are likely to rise in the short term, but upward momentum

in the long term has not formed yet, Sheng argued. (Sina Finance)

     Medium- and long-term corporate financing has been strengthened while short

term funding is shrinking as the deleveraging of the financial sector has

started to work, Lian Ping, chief economist at the Bank of Communications, said

Monday in a commentary in the Financial News, a journal run by the People's Bank

of China. The growth of loans to the the property sector has slowed, though

loans for property development grew in proportion due to the effect of stricter

regulation of the property sector, Lian noted, adding this does not change the

outlook for a slowdown of the property sector. Although mortgage loans grew at a

slower pace, short-term household consumption loans surged by three times in the

first three quarters compared with the same period last year, indicating many of

these loans are likely being used to fund property purchases, Lian warned,

suggesting regulators should impose stricter regulations on these loans.

(Financial News)

     China is likely to reopen the dollar-denominated sovereign bonds issued in

Hong Kong on Oct. 26 considering the large market demand for the initial 5-year

and 10-year issues, Caixin reported Saturday, citing a source familiar with the

information. China issued these non-rated bonds at a tricky time after some

international rating agencies had downgraded China's sovereign rating, Caixin

noted. The successful issuance, despite not having a rating, will encourage

other domestic bond issuers, mainly state-owned companies and local governments,

to issue non-rated bonds. The issuance sent a signal to the market that "this

[issuing non-rated bonds] is correct in political aspect", the source said.

(Caixin Magazine)

     The financial controls will enhance the "double-pillar" framework of

monetary policy and macro-prudential policy and prevent systemic financial

risks, the Economic Information Daily said in a front page commentary Monday.

The People's Bank of China should flexibly use its money market facilities to

improve the effect of prices in resource allocation, the commentary argued.

Regulators should enforce regulation and enhance "counter-cyclical" adjustment.

China should further enrich the framework by including cross-border capital

flows in macro-prudent assessments and increasing the prudent management of the

property market, the commentary suggested. (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

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