China Press Digest: Tuesday, Oct. 10

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

Tuesday, Oct. 10:

     Risk controls in the banking sector should not only crack down on illegal

transactions but also optimize management structures and enhance regulatory

coordination to support the underlying principle of avoiding systemic risks, the

Financial News, a journal run by the People's Bank of China, said in a

commentary on Tuesday. As restrictions on interbank and wealth management

businesses have been tightened, interbank assets and liabilities have posted

negative annual growth rates at the end of August of 13.8% and 1.6%,

respectively, to CNY3.2 trillion and CNY1.4 trillion, the commentary noted.

Regulators need to improve their capacity to prevent risks from innovative

financial products as well as prepare risk emergency plans, the commentary

argued. Regulators also should strengthen their communications and coordination,

which was the purpose of establishing the Financial Stability and Development

Commission, the commentary said. (Financial News)

     Short-term capital outflows are likely to occur again, as fluctuations in

cross-border capital flows are expected to increase, Guan Tao, former head of

the balance of payments division at the State Administration of Foreign Exchange

(SAFE) and now a research fellow with the Financial 40 Forum think tank, said in

a note published late Monday. According to international payment data released

by SAFE in September, private sector sentiment on the outlook for yuan

depreciation has started to rise, so if domestic and overseas economic

fundamentals show negative changes, such as a rise in the U.S dollar, capital

outflows will reappear, Guan warned. In addition, the deficit in services trade

now almost offsets the goods trade surplus, which means China's current account

surplus stands at only 1.2% of total GDP, the lowest level in 20 years, Guan

noted. This will reduce China's capacity to deal with short-term capital flow

shocks, he warned.

     Reforms should be pushed forward to maintain the healthy and stable growth

of the property market, the Financial News, a journal published by the People's

Bank of China, reported Tuesday. An increase in land supply is a more

fundamental measure that can be taken to achieve a balance of supply and demand

in the property market, rather than restrictions on house purchases and mortgage

loans, the report argued. The country needs to further promote the rental

housing market and reduce the addictive attraction of home ownership, the report

added. Other relevant reforms, including improving the household registration

system and better distribution of education and medical resources, also need to

be followed up. The high reliance of local governments on land sales for fiscal

revenue also needs to be resolved via fiscal and tax reform, the report said.

(Financial News)

     The statistical method for calculating GDP will be changed as of the third

quarter to include research expenditures, the 21st Century Business Herald

reported Tuesday. Research expenditures were previously classified as

intermediate costs. But the new method will add them as fixed-asset investments,

as some could bring economic improvements, the report said. The change will

increase the level of GDP, but is not expected to make a major difference in the

growth rate, the report noted. The National Statistic Bureau will release third

quarter GDP on Oct. 19. (21st Century Business Herald)

--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$$$]