MNI China Press Digest, July 3: LPR, Hong Kong, Small Banks

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

on Friday:

     China's Loan Prime Rate, the market-oriented loan price basis launched last

year - is likely to be lowered in July after staying unchanged for the last

three months, according to China Securities Journal. Citing Ming Ming, the

deputy head of the Research Department of Citic Securities, the Journal said

lowering borrowing costs for companies has become more important this year and

this required further cuts to the LPR. However, the PBOC needs to cut money

market policy rates or cut reserve ratios to drive banks to lower rates, so Ming

said more easing from the central bank was still likely in Q3.

     The problem the U.S. has with the situation in Hong Kong is not the passage

of new acts, but the extent to which it is willing to damage the Territory and

the mainland as well as its own interests, Global Times said in an editorial.

The US sanctions are merely symbolic, said the communist party tabloid. The U.S.

may raise Hong Kong tariffs to that of the mainland, or prevent the Hong Kong

dollar from pegging to the US dollar but those measures will come at some cost.

The US risks losing a large amount of its trade surplus with Hong Kong and this

will hit the US dollar's status as a global currency, the newspaper said.

     Local governments can deal with the financial risks of regional banks, or

they can promote mergers while recapitalizing the banks through convertible

bonds, according to a commentary by the China Securities Journal. The article,

citing unnamed analysts, said governments could require the banks to carry out

certain governance overhauls or reforms before converting the bonds into common

shares, which are recognized as core tier one capital. Regional banks in China

need to raise CNY900 billion to 1.5 trillion in capital by the end of 2020, the

article said quoting an estimate by China Securities.

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

--MNI Sydney Bureau; +61 405322399; email: lachlan.colquhoun.ext@marketnews.com

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