China Press Digest: Thursday, September 21

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

Thursday, September 21:

     China is accelerating preparations to fully implement the reduced negative

list of areas of the economy in which foreign entities are not allowed to invest

and plans to implement the list from January 1 next year, Economic Information

Daily reported Thursday. The first pilot regions in which the list will be

implemented have already entered a "summary stage" and 11 more areas, including

Hubei and Zhejiang, are expected to become new pilot regions in a second round.

(Economic Information Daily)

     China is encouraging foreign companies to participate in the reform of

state-owned enterprises in an attempt to transform some SOEs into mix-ownership

entities, which would be beneficial for the SOEs and China's economic

restructuring, the Securities Times said in a front-page commentary Thursday.

There should be three priorities for this approach, the newspaper said. The

reform of SOEs needs to use high-quality foreign investment which can provide

advanced technology and management techniques to SOEs. SOEs in economically

strategic industries should maintain their dominant status in share ownership,

but important high-tech and other companies could be controlled by private

investment and foreign investors could own more or all shares. China should

direct foreign investment mainly toward high-tech, high-end manufacturing and

the service sector, the newspaper said, noting that in previous experience

around 70% of foreign capital was invested in these sectors. (Securities Times)

     Local governments are tightening regulations to prevent the illegal use of

consumer loans to finance house purchases, the Securities Daily reported

Thursday. Beijing, Guangzhou and Shenzhen cities and Jiangsu province have

announced new policies to prohibit consumer loans being used to buy houses and

have asked financial institutions to conduct self-examinations to stop such

practices. Short-term consumer loan growth has skyrocketed this year, in

contrast with the stable growth rate of retail sales, the newspaper noted.

According to a report by the E-house consultancy, around CNY300 billion from

consumer loans was expected to flow into the property market, representing 30%

of total new short-term consumer loans. Fully 90% of short-term consumer loans

being used for housing has been issued in just six provinces: Guangdong, Fujian,

Suzhou, Shanghai, Sichuan and Hebei The newspaper said the new regulations

signal again that current policy controls on the property market will be

tightened further, with policies targeting specific segments of the market to

come. (Securities Daily)

     The Beijing Municipal Commission for Housing and Urban-rural development

has announced it will add around 50,000 "shared property rights houses" into the

market, the Securities Daily said in a front-page report. The Beijing government

has issued a new policy on such housing units, which are houses whose ownership

is shared between the government and inhabitants, but at a lower price because

the government gives up parts of its land revenue income. The new policy will

take into effect from September 30. Officials from the commission said a total

of around 250,000 "shared property rights houses" would be added to the housing

market in the period ahead, according to the newspaper. (Securities Daily)

     Negotiable certificates of deposit (NCDs) has been transformed from an

investment vehicle into a liquidity tool for the market, 21st Century Business

Herald reported Thursday. As the end of the third quarter approaches, money

supply is tight though the PBOC has enhanced its liquidity injections, perhaps

due to the large volume of NCDs maturing this month, the newspaper said.

Insiders told the newspaper that banks have much less motivation to issue NCDs

compared to six months, largely due to the tightening of regulations. Though the

ratio of NCDs to total bank liabilities had risen to 5% y/y at the end of July,

higher than the 3.5% in the same period last year, it does not mean a

deterioration of banks' liability structure. (21st Century Business Herald)

--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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