China Press Digest: Wednesday, August 2

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

Wednesday, August 2:

     In the short to medium term China's economy may maintain its stable status

and positive trend, the Economic Information Daily, a newspaper under the

official Xinhua News Agency, said in a front-page commentary Wednesday. The

conclusion is based on stable consumption, foreign trade and investment.

However, the newspaper said the real challenges for the economy lay in

investment. A tightening of local-government debt may affect investment in

infrastructure and the property market is slowing, too. Investment in

manufacturing is edging up but is relatively small. It is difficult to make up

for gaps left by the infrastructure and property sectors, it said. (Economic

Information Daily)

     Mild inflation and political uncertainty in the U.S. will continue to

pressure the dollar index but the yuan still has room for appreciation against

the U.S. unit - although not as much as in the first half, the China Securities

Journal reported Wednesday quoting analysts. Changes in the yield gap between

China and U.S. Treasury bonds, as well as the recently added "counter-cyclical

factor," were responsible for the increase in the yuan fixing Monday by the

People's Bank of China -- the strongest since Oct. 11, according to Guotai Junan

Securities futures analyst Wang Yang. Foreign-exchange traders said the

appreciation of the yuan was very likely. Although the dollar index may rebound

if the U.S. Federal Reserve announces in September a time for another

interest-rate increase and that it will shrink its balance sheet, expectations

for yuan depreciation have fallen significantly and the chances of this are most

unlikely, Wang Yan said. (China Securities Journal)

     No residential developments have received pre-sales permission in the past

two weeks and neither have there been any sales by lottery in Shanghai, the

Shanghai Securities News reported Wednesday. In mid-July the Shanghai government

announced a requirement for property developers to use lotteries for sales of

new property projects. Lotteries have been used in the past only when demand

exceeds supply. Now, developers are doubtful about using lotteries when demand

is less than supply, according to the newspaper. As of 4:00 p.m. Monday the

inventory of new residential units eligible for sale was 5.855 million square

meters. Based on sales of 686,000 square meters in June the inventory may be

sold in eight months, the Securities Daily said. This means property developers

are observing changes in the market before taking action, according to Centaline

Property analyst Lu Wenxi. (Shanghai Securities News)

     Liquidity in August will continue to be tight yet balanced, the Securities

Daily reported Wednesday. The People's Bank of China in July conducted

medium-term lending facility (MLF) of CNY 360 billion, standing lending facility

(SLF) of CNY13.981 billion and injected CNY58.3 billion pledged supplementary

lending (PSL) into China Development Bank, The Export-Import Bank of China and

Agricultural Development Bank of China. Reverse repo maturities, tax and

dividends will affect liquidity in August, the newspaper said. The use of MLF,

PSL and SLF by the PBOC are expected in August to maintain stable liquidity as

the bank experiments with "creative macro-control methods," the report said

quoting an unidentified trader from a state-owned commercial bank. (Securities

Daily)

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

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