MNI China Press Digest Aug 10: Credit, Liquidity, Property

     BEIJING (MNI) - The following lists highlights from the Chinese press for

Friday:

     Social financing and on-balance-sheet credit growth are expected to rise in

the second half of the year, as the major banks have increased reserves and

boosted loan grants, China Securities Journal reported, citing an unidentified

branch official of a major state-owned bank. Infrastructure, small- and

micro-sized enterprises and high-tech manufacturing will be the focuses of loan

investment, the newspaper said, citing the same official. Banks will likely see

one or two more required reserve ratio cuts within the year, which will boost

credit funds, enhance the degree of independence in lending and strengthen

support for targeted industries, the newspaper said, citing institutions

including Citic Securities.

     Interbank liquidity has been excessively loose, as indicated by the

inversion of the yield on benchmark 1-year China Government Bond and the rate of

open market operations (OMO), Economic Information Daily reported. Although

local bonds issuance and tax payments can partly drain liquidity, the excess

reserve ratio may be above 2% after the PBOC has skipped OMOs for 15 days, the

newspaper said, citing Haitong Securities. Large amounts of funds cannot flow

into the real economy, stuck in the interbank market, the newspaper said, citing

market participants. The PBOC may use repos and other monetary policy tools to

drain some liquidity to stabilise the market, said Citic Securities, according

to the newspaper.

     Industrial and Commercial Bank of China and Agriculture Bank of China have

both increased the mortgage rate discount from 5% to 10% for first-time home

buyers in Shanghai, 21st Century Business Herald reported. The mortgage rate for

a second house remains unchanged, at 10% higher than the benchmark interest

rate, the newspaper said. China Construction Bank and Bank of China have also

maintained a mortgage rate discount of 10%, according to the newspaper. Shanghai

is currently the only first-tier city that has a mortgage rate discount for

first-time home buyers in China, the newspaper added.

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

--MNI Beijing Bureau; +86-10-8532-5998; email: beijing@marketnews.com

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