MNI China Press Digest July 19: Reform, Smaller Banks, Income

Highlights from Chinese press reports on Friday:

• China will further centralise fiscal power and increase expenditure of central government to reduce burdens on local authorities who will likely obtain more tax sources to deal with fiscal difficulties, including localisation of consumption taxes, China Securities Journal reported on Friday citing analysts. The Party’s Third Plenum announced reforms to the fiscal, taxation and the financial system on Thursday. Analysts pointed out the supervision of the financial sector will be further strengthened to prevent risks. Monetary policy will shift focus to interest-rate control from the previous liquidity and credit management, while the capital market will be boosted to enhance the role of supporting the real economy, they said.
• China will likely push restructuring and mergers of small- and medium-sized banks and optimise policies to broaden the channels for their capital supplementation to advance their reform and risk mitigation, the Economics Daily reported on Friday. As the Third Plenum aimed to prevent the risks of small banks, the report said the issuance thresholds for capital instruments should be lowered under the premise of controllable risks, warning small banks are suffering the narrowed net interest margin weighted by high costs of attracting deposits, which has led to a decline in profitability. Moreover, there are only a few small banks that can list on the equity market, and the thresholds for issuing perpetual bonds and preferred stocks are also high, it said.
• Residents in 10 out of 31 provinces in mainland China have seen their per capita disposable income exceed CNY20,000 in the first half of the year, Yicai.com reported citing data from the National Bureau of Statistics. The per capita disposable income across the country was CNY20,733, a rise of 5.3% after deducting price factors. Shanghai and Beijing were the top two cities, with the figure reached CNY44,735 and CNY43,084, due to the concentration of high-income industries, the newspaper said.