MNI China Press Digest, May 16: Yuan, PBOC, NPLs

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

Thursday:

     China's monetary authority could use a "visible hand" to regulate the

foreign exchange market when necessary, the Economic Information Daily said in a

front-page commentary. The yuan is well supported by stable economic

fundamentals and decreasing forex sales by banks, and the authority is capable

of keeping the yuan stable at a balanced level, the newspaper said. The "visible

hand" is a key part of China's exchange rate formation mechanism, the commentary

said.

     The PBOC aims to drain liquidity through the sale of CNY20 billion of bills

in Hong Kong on Wednesday, according to a report in the Economic Daily. The

newspaper quoted Zhao Qingming, chief economist at China Financial Futures who

said the yuan is under great depreciation pressure with abundant liquidity in

offshore markets. Zhao said that while CNY20 billion is not a large amount, it

sent strong signals that the PBOC is making it harder to short the yuan.

     China's six major state-owned banks have been asked by regulators to

tighten the recognition of non-performing loans from the current 90 days to just

60 days, 21st Century Business Herald reported. The newspaper cited an unnamed

executive at one of the banks as the source for its report. Citing another

anonymous executive, the newspaper also reported that although the requirements

have not yet been documented, the strict supervision is good for large banks and

is conducive to the reduction of credit risks.

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

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

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