MNI China Press Digest Aug 15: Yuan, Bonds, Consumption

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

Wednesday:

     The PBOC should adjust market liquidity and exchange rate formation

mechanisms, and guide market expectations to manage large fluctuations in the

exchange rate, said Lian Ping, chief economist of Bank of Communications,

according to China Securities Journal. China should insist on the liberalisation

of the yuan to gradually strengthen the yuan's flexibility and achieve a

floating exchange rate system, Lian said, according to the newspaper. The

internationalisation of the yuan should rely on China's real economy rather than

on the currency's strength, in order to develop cross-border trades and foreign

direct investment, Lian added, according to the newspaper.

     Ministry of Finance (MOF) urges local governments to accelerate their

issuing of special government bonds, Shanghai Securities News reported. An MOF

statement was released after infrastructure investment growth recorded a fall to

5.7% in Jan-July from 12.4% in Jan-April. The CNY1.35 trillion in additional

special government bonds this year will mainly be used on targeted poverty

alleviation, shantytown renovation and other projects in progress, the newspaper

said, citing Liu Wei, vice minister of the MOF. A pick-up in the pace of local

government bonds issuance will strengthen local governments' financing

capabilities, expand consumption, and lower financial risks, said Zhang Yiqun,

director of Institute of Fiscal Science of Jilin Province, according to the

newspaper.

     The slowdown in China's consumption growth is inevitable considering

consumption upgrades and structural adjustments, as indicated by July's growth

coming in at 9.3%, unchanged from the first half of the year, 21st Century

Business Herald said in a commentary. China should not stimulate consumption

with short-term policies and distort the economic structure, the newspaper said.

To elevate consumption, China must lower housing costs to release room for

individual consumption, and must significantly lower taxes to increase

individual disposable income, the newspaper said.

--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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