MNI China Press Digest Aug 17: LPR, Growth, Structural Reform

The following lists highlights from Chinese press reports on Tuesday:

• The PBOC is likely to keep the benchmark LPR unchanged on the 20th of this month, but lenders may be more incentivised to quote lower rates as their cost of capital declines, the Securities Times said citing Wang Qing of Golden Credit Ratings, after the central bank kept the MLF rate at 2.95% on Monday. The central bank exceeded market expectations yesterday when it renewed CNY600 billion of the CNY700 billion maturing MLF. The backwardation between market rates and the 2.95% MLF rate rose to 30 bps on Aug. 13, limiting banks' demand for the MLF operation, the newspaper said. Lenders stood to save CNY13 billion in capital costs when the PBOC cut RRRs in July and helped them reduce costs of deposit in June, the newspaper said.
• China's State Council on Monday urged officials to use funds including those unlocked through the July RRR cut to increase financial support to small businesses and invest in labour-intensive industries to boost employment. The authorities must increase cross-cycle measures to ensure reasonable growth amid new outbreaks, volatile commodities and natural disasters, Premier Li Keqiang's government said following an executive meeting. Officials also must ensure market supply and stabilize prices of raw materials including selling reserves, and investments and consumption should be boosted through selling special-purpose local government bonds, the government said.
• China should make good use of the current window to improve its economic structure while accepting a lower growth, the 21st Century Business Herald said in an editorial. The main challenge is to boost consumption, which needs better social distribution, the newspaper said, noting the finance, real estate sectors and some Internet platforms have benefited the most in the market and suppressed the real economy as well as pushed up residents' leverage and affect spending. The traditional countercyclical adjustment of boosting infrastructure and real estate investment is inefficient as such investment could not create long-term value compared with its huge input cost, but pressured the country's close-to-limit debt tolerance, the newspaper said.