MNI China Press Digest, Feb 21: PBOC, Premier Li, PPI Downturn

     BEIJING (MNI) - The following lists highlights from Thursday's China press:

     The significant increase in bill financing in January has supported the

real economy, helping lower financing costs of SMEs, the Monetary Policy

Department at the PBOC said today in a front-page commentary in the Financial

News, a newspaper run by the PBOC. The PBOC said some of the bill financing had

been used by companies to 'arbitrage' between banks to pick up on rates, but

noted this was only temporary as there was little arbitrage opportunity with

structured deposit interest rates returning to a reasonable level, the PBOC

said. The PBOC comments were seen combatting rumours that firms' arbitrage was

the main driver boosting the latest bill financing figure.

     China will not change its prudent monetary policy, determined not to flood

the economy with excess liquidity and credit to spur growth, Premier Li Keqiang

told the State Council executive meeting Wednesday, according to the government

website. Li explained that the two reserve requirement ratio (RRR) cuts in

January were in line with market expectations, adding that China has plenty of

room for RRR cuts as the rate is higher than any other major economy. Liquidity

has been withdrawn properly during the cuts, the website cited Li as saying.

     There is no need for concern over the current PPI downward trend, as it is

not caused by money supply or lack of liquidity, but price adjustment of

upstream production materials, the Economic Daily said in a commentary today.

The impact of a PPI downturn will be mainly felt in the industrial sector, the

paper said, but it shouldn't be used as the sole indicator of how the sector is

performing.

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

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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