China Press Digest: Tuesday, October 31

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

Tuesday, October 31:

     Liquidity conditions in the interbank market are expected to come under

pressure in the short term as a large amount of the People's Bank of China's

monetary facilities mature, the China Securities Journal reported Tuesday.

Facilities worth about CNY1 trillion will mature this week, the second-biggest

week this year. The PBOC needs to act to contain potential risks, the report

suggested. Tightness caused by structural problems will be amplified because

banks will be reluctant to lend at the end of month, which will further push up

money market rates, the report warned. Excess reserve ratios of banks are still

low and combined with negative factors at home and abroad, liquidity conditions

can be expected to remain tight for the rest of this year, the report noted.

(China Securities Journal)

     A rebound of the U.S. dollar will put pressure on the yuan exchange rate

and increase uncertainty over the yuan's volatility in the short term, a former

head of the balance-of-payments division of the State Administration of Foreign

Exchange (SAFE) predicted in comments cited by the Securities Times on Tuesday.

But China's economic performance, tight monetary policy and strict financial

regulation have provided a good base for a strong yuan, Guan Tao, now a research

fellow with the 40Forum think tank, told a Beijing financial conference on

Monday. Private consumption and services need to contribute more to the economy,

Guan argued. Monetary policy will be neutral or perhaps tighten, and financial

regulation will continue to be strengthened, which is likely to be the new

normal, Guan said. (Securities Times)

     Liquidity in the interbank market was ample and the yield curve for

government bonds was steep in the first three quarters this year, but trading

volume fell in both markets, the Financial News, a journal run the People's Bank

of China, reported Tuesday. As of the end of September, trading volume in the

interbank market had fallen 5.4% compared to the first three quarters of last

year to CNY191.8 trillion, mainly because interbank lending plummeted 35.4%

year-on-year to CNY18.9 trillion. Government bond rates rose at a slow pace in

the first three quarters, and trading volume plunged 18.9% from the same period

last year, to CNY29.9 trillion, as the economy performed well and the government

enforced stringent financial regulation, the report noted. (Financial News)

     Chinese banks performed well in the first three quarters this year, with

net profits continuing to grow and the ratio of nonperforming loans falling

further, the Securities Daily reported Tuesday. State-owned banks grew at a

steady pace, according to listed banks' reports. The Industrial and Commercial

Bank of China was the biggest money maker, with its total net profit increasing

2.22% compared with the first nine months of last year, to CNY229.09 billion.

Net profits of city commercial banks mostly grew by double digits in the period,

with the highest growth rate above 18%. But some banks were forced by regulators

to scale back their balance sheets, the newspaper said. (Securities 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

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