MNI China Press Digest Aug 16: Bad Loans, MLF, Credit

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

Thursday:

     An increase in the bad loans rate, caused by stricter standards for bad

loans and the deleveraging of enterprises, does not indicate deterioration in

asset quality, said Zhao Changwen, analyst of Development Research Center of the

State Council, according to Financial Times, a publication under the PBOC. It

is, however, necessary to be cautious about the surge in individual housing

loans and its potential risks, Zhao said, according to the newspaper. Risks in

the banking sector are still controllable, but rises in housing prices must be

firmly curbed, macro deleveraging rate must remain stable and the transformation

and upgrading of the real economy must see substantial results, Zhao added,

according to the newspaper.

     The injection of CNY383 billion via medium-term lending facility (MLF)

loans yesterday keeps liquidity at a sufficient level, but an extremely loose

money supply scenario will likely not reoccur as the rate of MLF loans is higher

than the monetary market rate, said Li Qilin, chief macro analyst of Lianxun

Securities, according to Shanghai Securities News. The MLF injection aims to

help banks relieve pressure from the upcoming large issuance of special

government bonds, Li added, according to the newspaper. Expectations for

targeted required reserve ratio cuts by the end of the year have been lowered,

as China has vowed to implement more proactive fiscal policies, the newspaper

said, citing analysts including Li.

     China should maintain a consistent and stable monetary policy and a more

proactive fiscal policy to achieve its goal of loose credit, China Securities

Journal said in a commentary. Banks could appropriately loosen the constraints

on assets release and lending, and further innovate capital instruments to lift

their capital levels, the newspaper said. However, the authorities should

control the pace of its "loose credit" campaign to prevent financial

institutions from leveraging again when proper and sufficient liquidity is

resumed, 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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