China Press Digest: Wednesday, August 9

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

Wednesday, Aug. 9:

     Many debt-to-equity swaps have been agreed since October but few have been

implemented, the Securities Daily reported Wednesday. As of June 9 a total of 56

swap agreements have been signed involving CNY709.5 billion but 10 only for a

total of CNY73.45 billion have been fulfilled, the report said. A lack of rules

guiding companies' smooth withdrawal from the capital markets is the reason. The

high cost of equity withdrawal is another factor. Participants are mainly

state-owned companies -- particularly those with overcapacity including steel

and coal producers, the report said. (Securities Daily)

     Banks are starting to increase bond holdings again as interbank liquidity

becomes looser and capital costs fall, the 21st Century Business Herald reported

Wednesday. A net CNY1.8 trillion was raised in the bond market in July -- the

highest since July 2016 -- after it fell in May, the report said. Total bond

issuance reached as much as CNY3.94 trillion in July -- the most since March

2106, it said. Financial institutions are actively holding bonds after demand

was restricted by tight interbank-transaction regulations in the first half of

the year. In the second half banks will increase bond buying, the report said.

(21st Century Business Herald)

     The most important step to improving the yuan exchange-rate formation

mechanism is to optimize the market-oriented yuan fixing pricing system, the

China Securities Journal reported Wednesday. The yuan fixing pricing system

should better reflect demand and market changes as well as avoiding the

overreaction of market participants, the report said. The "counter-cyclical

factor" is necessary while the market is under pressure but will also influence

the marketization of the exchange rate. Increased opening up of China's forex

market to foreign participants is important. The volatility range of the

exchange rate may be widened at a moderate pace -- but that isn't urgent, the

report said. (China Securities Journal)

     Liquidity will be stable in August after the People's Bank of China's net

injections via open-market operations in July, the Economic Information Daily

reported Wednesday. Monetary policy will maintain a "neither-tight-nor-loose"

bias because deleveraging and risk prevention are the main objectives, it said.

In the long term existing regulations will be maintained but deleveraging will

ease in a bid to reduce significant volatility in liquidity. The PBOC will

concentrate on short-term monetary instruments including seven-day reverse repos

to reduce funding costs in the real economy, the report noted. (Economic

Information Daily)

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

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