MNI China Press Digest, Aug 30: China-U.S., Interbank, Bonds

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

on Friday:

     Moves to order American companies to leave China would decouple the Chinese

and U.S. economies and endanger the global supply chain and international trade,

Xinhua News Agency said in a commentary. Such moves were contrary to the laws of

the market economy and the trend towards globalization, and would sacrifice the

interest of American companies, Xinhua said.

     China's bond market is disturbed by rumours suggesting that regulators

could include policy bank bonds in interbank investment management and limit the

size of interbank assets, said Ming Ming, chief analyst at CITIC Securities in a

report. Ming said such rumours have led to the weakening of policy bank bonds

while strengthening government bonds. He said policymakers could be aiming to

curb the disorderly expansion of the interbank assets of some small and

medium-sized banks, rather than targeting policy banks. Increased interbank

regulations and the marginal tightening of credits would be conducive to drive

down risk-free interest rates, Ming said.

     Foreign investors are buying more policy bank bonds than Chinese Government

Bonds (CGBs) in July and the purchasing power of foreign capital has become an

important influence on interest rate bonds, Securities Times reported. Overseas

institutions bought CNY62 billion of yuan bonds, among which policy bank bonds

accounted for 62%, compared to a proportion of 11% for CGBs, the newspaper said.

--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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