China Press Digest: Wednesday, Nov. 1

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

Wednesday, Nov. 1

     The default of Dandong Port's 5-year corporate bond on Monday has spooked

the market, particularly when government bonds have suffered a correction

recently, the Shanghai Securities News reported Wednesday. The Dandong Port

issued its CNY1 billion, 5-year bond on Oct. 30, 2012 and the default involves

several banks and funds, the report said. With the yield on 10-year government

bonds having recently surged to a three-year high of close to 4%, market

participants have become cautious, creating selloff pressure on corporate bonds,

the report warned. (Shanghai Securities News)

     After the 19th Communist Party Congress, China's economic development will

focus on improving quality and efficiency while maintaining medium to high speed

growth, the Financial News reported Wednesday, citing Wang Yiming, vice-director

of the Development Research Center under the State Council. The demand for

energy and mineral resources will peak as rising demand from new industries is

offset by slowing demand from old ones, Wang said. Provincial-level revenue will

continue to rise as urbanization deepens. China will build up a modern economic

system with improvements in supply-side quality as a priority, Wang noted.

(Financial News)

     Chinese systemic risks stem partly from the insufficient opening of the

financial sector so that market discipline cannot be implemented in an efficient

way, The Paper report Wednesday, citing Huang Yiping, an academic and a member

of the People's Bank of China Monetary Policy Committee. The Financial Stability

and Development Commission run by the State Council will work as a coordinator

for the process of opening up the financial market, Huang said. But reform and

opening need to be pushed forward together to prevent risks to financial

security, Huang suggested. (The Paper)

     China's foreign exchange position won't see a big increase or decline this

year as the People's Bank of China has no reason to intervene when the yuan is

fluctuating in both directions against the U.S dollar, the China Securities

Journal reported Wednesday, citing E Yongjian, chief analyst with the Bank of

Communications. The yuan suffered obvious appreciation pressure in the month

from the middle of August to the middle of September, as banks sold more foreign

exchange to clients, so the PBOC likely purchased dollars from the market during

that period to curb the rise, E said, adding the forex position turned positive

in September. There will be no significant appreciation pressure on the yuan for

the rest of this year, E predicted.

     The risk of debt and deflation should be considered in the process of

deleveraging, Xu Zhong, director of the People's Bank of China Research Bureau,

said recently in Shanghai, according to Netease Finance. Deleveraging should

move forward at a proper pace to avoid undue pressure on credit and investment,

Xu noted. The key to deleveraging at present is to deepen supply-side reform and

enhance restrictions on debt to improve productivity and the return on assets,

Xu stressed. (Netease Finance)

--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

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