MNI China Press Digest, Aug 23: Yuan, Rate Hike, Govt Bonds

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

Thursday:

     The yuan should not depreciate significantly, Securities Times said in a

commentary. Weaknesses outweigh strengths if the yuan depreciates significantly,

the newspaper said, warning that a much weaker yuan could cause large amounts of

capital outflow and even may even cause systemic financial risks. China should

learn a lesson from Turkey's currency crisis and stabilise the yuan exchange

rate, the newspaper commented. Depreciating the yuan to increase exports is not

a smart choice, as not all countries can rely on currency depreciation to gain

long-term increases in large-scale exports, the opinion piece said.

     The PBOC may increase its open market rate if the U.S. Fed raises its

benchmark interest rate in September, China Securities Journal reported, citing

analysts including Wen Bin, chief researcher at China Minsheng Bank. The Fed's

interest rate hike would shock emerging markets, and a stronger dollar brings

more uncertainties to global financial markets, the Journal reported. Domestic

challenges must also be noted, including economic slowdown pressure,

uncertainties caused by deleveraging and structural reform, according to the

Journal. China's monetary policy needs to balance a stable economic growth with

risk controls, while also ensuring credit flows to the real economy, the report

said. Expanding domestic demand is a key to stabilising growth, the Journal

said.

     Selected local governments are required to raise coupons of local

government bonds to boost issuance and attract investment, Shanghai Securities

News reported. Regulators asked local governments to set local government bond

coupons 40 BP higher than coupons of China Government Bond of the same term,

according to the newspaper. The move came after the Ministry of Finance asked,

in mid-August, to speed up issuance of local governments' special bonds for

infrastructure investment. Thus far, Guangdong, Jiangsu and Zhejiang provinces

have increased coupons of local government bonds by 40 BP, the report said. Some

financial institutions are buying more local government bonds, which are having

favourable yields, it said.

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

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

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