MNI China Press Digest, Aug 13: Yuan, PBOC, Liquidity

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

on Tuesday:

     U.S. descriptions of China as a "currency manipulator" will not change

China's foreign exchange policy, and China will continue along the path of

financial reform and market opening, a senior PBOC official has said in a

newspaper commentary. The PBOC-operated Financial News published comments from

Pan Gongsheng, the deputy governor of the PBOC and director of the State

Administration of Foreign Exchange, who said the FX market would stabilize after

a brief shock. Pan said there would be no disorderly devaluation of the yuan, as

the currency was well supported by the resilience of the Chinese economy.

     The PBOC is expected to increase counter-cyclical adjustments to monetary

policy after a significant drop in M2 in July, according to a report in the

China Securities Journal. Citing interviews with analysts, the Journal report

said that after M2 fell to 8.1% y/y in July from June's 8.5%, the PBOC could be

expected to reduce corporate financing costs and selectively cut the reserve

requirement ratio. The contraction of off-balance sheet financing and the lack

of credit supply were the main reasons for the M2 decline, the newspaper said.

     The PBOC is likely to inject liquidity through conducting reverse repos and

the medium-term lending facility (MLF) to offset the maturity of MLF and the tax

season, China Securities Journal reported. The report noted that the decreasing

FX purchase position could dampen the liquidity of the local currency,

suggesting the PBOC may need to act if it continues to decline.

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

--MNI Sydney Bureau; +61 405322399; email: lachlan.colquhoun.ext@marketnews.com

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