MNI China Press Digest Feb 5: Yuan, Macro Control,Capital Cost

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

Monday:

     China's two-pillar macro-control framework, comprised of monetary and

macro-prudential policies, will be improved to maintain financial stability,

Financial News reported, citing officials and analysts.

 - The monetary policy smoothen economic cycles taking into account of CPI,

while the macro-prudential policy is pegged to broad credit and property prices.

 - The macro-prudential policy will focus on regulating banking institutions,

including leverage ratio, liabilities structure, and cross-border capital flow.

 - Non-banking institutions, including their businesses such as wealth

management products, fin-tech and shadow banking, will also be regulated, said

Chen Ji, senior researcher of Bank of Communication. 

***COMMENT: Banks need to reduce interbank liabilities and contract assets to

meet strict regulation. This will cut down the total amount of negotiable

certificates of deposit, and reduce competition in attracting general deposits. 

     The internationalization of the yuan will accelerate in 2018 due to policy

support, as well as a receptive market and international environment, said the

Economic Information Daily in a front-page commentary.

 - Yuan payments will see an increase in countries along the One Belt, One Road

Initiative

 - Market mechanisms will be further optimized as the Shanghai-London Connect

and the yuan-priced crude oil futures are expected to be launched in due course.

***Comment: More people expect a stronger yuan this year. stronger yuan makes

the currency more appealing

     Rising capital costs caused by deleveraging is hurting the real economy and

financial institutions, the 21st Century Business Herald reported.

 - Companies have found it harder to raise funds as banks have slowed credit

provision under strict regulation, while high rates of bond issuance constrain

the effects of direct funding.

 - Banks are also in difficulty as the gain in money market rates is faster than

the growth of interest rates. 

***COMMENT: There are growing voices that argue for adequate capital as China

deepens the deleveraging campaign. 

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

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]