MNI China Press Digest, Aug 24: FDI, Local Govt Bonds, Tax

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

Friday:

     Chinese authorities will further reduce restrictions on foreign investment

in financial institutions, China Securities Journal reported, citing Zeng Gang,

deputy director of National Institution for Finance and Development. These

policies may include further reducing restrictions on the market entry of

financial institutions and on foreign companies' investment in non-financial

institutions, Zeng was cited as saying, who added that the process would take

time. China's banking regulator on Thursday announced that it would lift

shareholding restrictions for foreign investment in Chinese banks and financial

asset management companies. The move will have several positive effects, Zeng

said, but China does not need to offer more benefits to foreign investment than

domestic companies. The commission is also working in risk controls, and

financial institutions in Europe and Japan have recently asked for more

investment expansion in China, the Journal noted, citing an official from the

CBIRC.

     Chinese banks are increasing investment in local government bonds as the

central government recently issued favorable policies, 21st Century Business

Herald reported. Fast decreases in bond yields of LGFVs, as well as the tax

exemptions of local government bonds, have both helped boost banks' investment

in local government bonds, especially after the Ministry of Finance required

coupon rates of local government bonds to be at least 40BP higher than CGB of

the same term. However, recent rumours that the Chinese government may lower

risk weighting on local government bonds from 20% to 0% would be difficult to

put into place, the newspaper said, citing analysts and bankers that say such a

measure would go against global rules including BASEL III.

     Various measures by central and local governments indicate that China is

coming closer to establishing a property tax, Securities Daily reported. The

State Council in mid-August issued a document that requires all cities and

provinces to implement a comprehensive registration of properties. The

establishment of an Internet system which stores information of houses, along

with property registration, indicates a property tax will likely be implemented,

the newspaper said, citing Zhang Yiqun, director of Jilin Province Chinese

Academy of Fiscal Sciences. Several provinces have also accelerated reform of

the registration processes for properties, the newspaper 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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