MNI China Press Digest May 11: Domestic Demand, Bond Defaults

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

Friday:

     China's recent reiteration of plans to increase domestic demand does not

mean macro-policies will be changed, Economic Information Daily said in a

commentary. Instead, the country aims to adjust its economic structure and will

not go back to the old path of stimulating the property market and

infrastructure investment, the newspaper said. Next steps will involve

increasing imports and consumption, improving the "effectiveness of investment"

in infrastructure in less-developed areas, as well as encouraging private

investment, the Daily said. 

     "Structural" defaults of bonds will continue as China maintains a prudent

and neutral monetary policy and the deleveraging campaign advances, China

Securities Journal said. Recent frequent defaults of bonds of Chinese companies

have been partly the result of supply-side reforms and deleveraging which

exposed companies with overcapacity, inadequate management, weak cash flow or

high debt to real risks they should have faced before, the Journal said. Given

China's economic growth was solid last year, and the fact that companies still

have sufficient cash flow, the risk of bond defaults is ill controllable. Credit

risk should not be the main theme in the bond market this year, the Journal

said.

     The PBOC officials are discussing a rule that the PBOC will manage payment

companies' accounts which store customer provisions, 21st Century Business

Herald reported. PBOC is to require payment companies to create a new account

managed by the PBOC and transfer customer provisions which were stored in

commercial banks to the new account, the Herald reported. The rules would take

effect first for some payment companies as a pilot program, the newspaper said. 

***Comments: The PBOC is trying to further clamp down on financial risks and

regulatory arbitrage of financial institutions. Customer provisions, the prepaid

money of customers for future services, are stored in accounts set up in

commercial banks and face the risk of being used by payment companies or

commercial banks for their own purposes.

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

--MNI Singapore Bureau; +65 8233 2326; email: Asia-Editor@marketnews.com

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