China Press Digest: Wednesday, Oct. 18

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

Wednesday, Oct. 18:

     The recent two-way movement of the yuan exchange rate against the U.S.

dollar is "normal," Yi Gang, deputy governor of the People's Bank of China told

MNI during the opening of the 19th Communist Party Congress Wednesday.

     "Stability" will remain the core goal of future monetary policy, the

Financial News, a journal run by the People's Bank of China, reported Wednesday,

citing analysts. The PBOC always conducts its operations to maintain the

stability of liquidity in the interbank market and uses a series of monetary

instruments in a flexible manner to ensure that liquidity is "neither loose nor

tight," the report noted. The central bank also carries out fine-tuning

operations and manages market expectations to avoid excessively tight or loose

liquidity, the report said. (Financial News)

     China will further deepen financial reforms to optimize the multi-layer

capital market system and the market-oriented interest rate and exchange rate

formation mechanisms, the China Securities Journal said in a front-page

commentary Wednesday. The deleveraging campaign has made progress, although the

financial system leverage ratio is still high. Direct fund raising needs to be

increased and weaker sectors, including the micro and small companies, need more

financial support, the commentary noted. China will push forward the opening of

its capital account at a stable pace and improve the efficiency of financial

regulation, the commentary added. (China Securities Journal)

     The contribution of consumption to economic growth has shown an obvious

rise as supply-side reforms continue and demands by the middle class increase,

the 21st Century Business Herald reported Wednesday. The contribution ratio of

consumption to GDP growth rose to 64.6% in 2016 from 47% in 2013. Policy makers

have noticed the effect of consumption and have taken various steps to improve

consumption, particularly in E-commerce. As increases in exports and investment

slow, consumption will be the main pillar of the economy in the future, the

report noted. (21st Century Business Herald)

     While the yields on corporate bonds have remained relatively stable,

treasury bond yields have risen to their highest level this year, the China

Securities Journal noted in a report Wednesday. The yield on 10-year treasury

bonds broke above 3.7% Monday and has continued to rise, though the spread with

corporate bonds is still low. The divergence of the yields indicates that market

expectation on government policies is not as pessimistic as it was before, the

report argued. Net issuance of treasury bonds will total CNY614.46 billion in

the fourth quarter, a record high level, which will further pressure yields. In

contrast, the demand for corporate bonds is stable and qualified companies

remain reluctant to float new issues, the report noted. The bond market will

continue its correction as new regulations are launched and liquidity tightens,

so the bond yields have not yet peaked, the report warned. (China Securities

Journal)

--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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