China Press Digest: Wednesday, Sept 20

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

Wednesday, Sept. 20:

     The yuan's long-term one-way depreciation trend has ended and it will show

two-way volatility in the future. The rise in the yuan against the U.S. dollar

in the past two months won't occur again, the Chinese Securities Journal said in

a front-page report Wednesday. Although the economy has grown and capital

outflows have relaxed this isn't sufficient to support yuan-appreciation

expectations, the report said. Recent rapid appreciation wasn't in line with the

target of stabilizing growth, it said. The People's Bank of China is trying to

halt the yuan's appreciation. (China Securities Journal)

     The People's Bank of China's balance sheet shrunk again in August as a

result of a reduction in fiscal deposits, the Shanghai Securities News reported

Wednesday. As at the end of August the balance sheet decreased CNY346.6 billion

month over month to CNY34.71 trillion. It was the third fall this year after

reductions in February and March, the report said. Government deposits fell

CNY532.2 billion. Claims on Other Depository Corporations -- mainly PBOC

monetary policy instruments such as open-market operations and medium-term

lending facilities -- fell CNY520.8 billion for the month, the report said. The

reserve requirement ratio must be cut to meet liquidity demands by financial

institutions, the report said quoting analysts. (Shanghai Securities News)

     The People's Bank of China's Beijing operations' office said Tuesday it

supports commercial banks in Beijing increasing mortgage rates by 5% to 10%

above benchmarks, the Securities Times reported Wednesday. Some banks have

increased mortgage rates -- which is in line with policies for curbing the

property market and strengthening credit support for the real economy, the

office said. Other large cities such as Shanghai, Shenzhen and Nanjing have

increased mortgage rates for first-home buyers, the report said. Most small- and

medium-sized banks have raised rates by 10% because of higher capital costs, the

report said. (Securities Times)

     Cross-quarter liquidity will better estimates as fiscal spending increases

and the People's Bank of China accelerates net injections, the China Securities

Journal reported Wednesday. Interbank-market liquidity tightened this week as a

result of tax payments but this will pass, the report said. The approaching

National Day holiday and macroprudential assessments will pressure liquidity

which will prop up money-market rates. Liquidity tightness in July and August

resulted from structural problems in the banking system, the report said. (China

Securities Journal)

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

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