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MNI China Press Digest Aug 11: Liquidity, Yuan, Special Bonds

MNI (Singapore)

The following lists highlights from Chinese press reports on Wednesday:

  • The PBOC is expected to boost liquidity by increasing reverse repo operations or rolling over the maturing medium-term lending facilities when the anticipated rise in local government bond sales drains liquidity, the China Securities Journal reported citing analysts. About CNY1 trillion local government bonds may be issued in August, mainly concentrated in the second half of August, the newspaper said. This may pressure liquidity along with the maturing of CNY700 billion of MLFs as of Aug. 17 as well as the upcoming season of tax payments, the newspaper cited analysts as saying.
  • China should expand the scope of yuan pricing and settlement, and facilitate the use of yuan in cross-border trade and finance to promote the internationalization of yuan, the China Securities Journal reported citing Tu Yonghong, deputy director of the International Monetary Institute at Renmin University. China should facilitate the use of yuan when conducting direct investment overseas by adopting a "closed-loop" yuan-based capital flow, the journal said citing Tu. Yuan settlement accounted for only 14.7% of China's foreign trade in H1, the newspaper said citing Guan Tao, a former FX regulatory official.
  • More local Chinese governments are expected to recapitalize their regional banks through selling the so-called special purpose bonds mandated by the Ministry of Finance, the Shanghai Securities News said. This form of recapitalization can burden regional governments with bad debt should these local banks, often with lower credit ratings, run into operational difficulties, the newspaper said. So far this year, eleven provinces have sold such bonds worth CNY112 billion, including Tianjin's CNY9.3 billion offering and CNY7.7 billion by Inner Mongolia, the newspaper said. The finance ministry in November allocated CNY200 billion quotas to be used by 18 provinces for the capitalization purpose, the newspaper said.
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