MNI China Press Digest June 21:RRR Cut;Deleveraging;Liquidity

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

Thursday:

     China will use targeted required reserve ratio cuts and other monetary

policy tools to support the provision of credit to micro and small-sized banks,

as announced during the executive meeting of the State Council held by premier

Li Keqiang, reported Shanghai Securities News on Thursday. The quota for the

refinancing and rediscount of micro and small-sized banks will be increased and

the interest rate of refinancing for micro and small-sized companies loans will

be decreased, Li said, according to the report. China will continue to keep its

monetary policy prudent and neutral, while keeping liquidity reasonable and

abundant and also keeping the financial sector operating steadily, the premier

said, according to the report.

     Big banks are cutting their interbank assets, and small- to medium-sized

banks are reducing their dependency on interbank liabilities, showing the

effects of the ongoing financial deleveraging campaign, Securities Times

reported. The interbank liabilities of small- and medium-sized banks reduced to

CNY12.82 trillion in May from CNY14.01 trillion at the end of 2017, the lowest

in 17 months; and big banks saw their interbank assets dropping from CNY5.05

trillion last year to CNY4.04 trillion in May, the report said, according to

data from the PBOC.  Small- and medium-sized banks wanted to reduce their

issuances of negotiable certificates of deposit because of both the quota set by

the regulators, and their own intentions to actively adapt to regulation

measures, said the report, citing a source at a big joint-stock bank.

     It is necessary to adhere to a stable and neutral monetary policy and to

keep liquidity at a reasonable level, Premier Li Keqiang stated at the executive

meeting of the State Council, reported China Securities Journal. Although

liquidity stress is relatively high in some places and credit defaults are

occurring, these are not likely to result in liquidity risks, said the paper,

citing Cheng Shi, chief economist at ICBCI. It is possible for the PBOC to

conduct targeted required reserve ratio cuts once or twice in the second half of

the year while raising open market rates once, the newspaper said, citing Cheng.

The PBOC should control the intensity of monetary policy and the pace of

deleveraging to maintain balanced liquidity conditions, said Shen Jianguang,

chief economist of Mizuho Securities, according to the journal.

--MNI Beijing Bureau; +86 10 85325998; email: he.wei@marketnews.com

--MNI Beijing Bureau; +86-10-8532-5998; email: beijing@marketnews.com

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