China Press Digest: Thursday, September 7

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

Thursday, Sept. 7:

     While the yuan exchange rate has shown an obvious fluctuation against the

U.S. dollar recently, there is a decreasing possibility of a sharp appreciation

or depreciation this year, the Financial News, a newspaper operated by the

People's Bank of China, reported on its front page Thursday, citing analysts.

Several influences, including a robust economy, a weaker dollar, stricter

controls on capital flows and a newly added "countercyclical adjustment factor"

for the currency's daily fixing, have bolstered the yuan's strong performance.

Supply and demand in the foreign exchange market have replaced the dollar index

as the main driver of the exchange rate, due to a sharp short-term increase in

foreign exchange sales by companies. However, the U.S. dollar is expected to

rebound if President Trump's tax overhaul plan is approved and the euro loses

momentum, the newspaper warned, adding that a potential trade conflict between

China and the United States might have a negative effect on the yuan. (Financial

News)

     The rapid growth of public-private partnership projects (PPP) is overly

reliant on preferential government policies, and the high leverage ratio of

these projects could create credit bubbles, the China Securities Journal warned

in a report Thursday, citing Xue Tao, an economist with National Development and

Reform Commission, China's top economic planning agency. Since 2014, investment

in PPP projects has totaled over CNY16 trillion. The projects, mainly those

involving engineering, usually focus on initial construction and neglect their

later operations and management, Xue said. Regulations limit investment in PPP

to no more than 10% of the total budget of the participating local government,

but some local governments have illegally used project funds to add leverage,

Xue noted, warning that this had undermined the central government's control of

fiscal expenditure. (China Securities Journal)

     The People's Bank of China restarted its 28-day reverse repo injections on

Wednesday to stabilize cross-quarter liquidity in the interbank market, the

Shanghai Securities News reported Thursday. This was the first time that the

PBOC had used the 28-day reverse repo in two and half months, although the

amount was just CNY20 billion. The central bank has consistently drained

liquidity this week, but the market has not experienced tightness, particularly

in short-term liquidity. Analysts expect the PBOC to continue to inject

longer-term capital to avert a possible liquidity crunch as its macro-prudential

assessments of banks approach at the end of September, the newspaper said. But

the central bank will keep the rate for the DR007 drepo -- a seven-day repo only

between banks -- between 2.9% to 3.0% to stabilize funding costs, the newspaper

added. (Shanghai Securities News)

     It is time for a measured lifting of restrictions on stock and futures

markets, as volatility has narrowed and participants' confidence has recovered,

the Economic Information Daily said in a commentary on its front page Thursday.

The government has focused on enhancing regulatory control and boosting

confidence in the past two years, but now the temporary restrictions introduced

to deal with a crisis should be withdrawn, the commentary suggested. The

market-oriented overhaul of the securities market needs to move forward so that

capital markets can resume functioning to serve the real economy, the commentary

noted. (Economic Information Daily)

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

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

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

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