MNI China Press Digest, May 28: Financial Market, Yuan, PBOC

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

on Tuesday:

     Trade friction between China and the U.S. is expected to have a decreasing

impact on the stock, bond and foreign exchange markets in the future, according

to the PBOC-run newspaper Financial News. A front page report today cited Guo

Shuqing, chairman of China Banking and Insurance Regulatory Commission (CBIRC),

who said financial markets were not prepared when the trade issues developed

last year, but it was now understood that China's financial system could

withstand external headwinds and the impacts would be limited. Guo also said

that the financial risks were controllable, and regulators were being proactive

in dealing with risks before they developed into any crisis.

     The stability of the yuan exchange rate has become the key focus of the

PBOC, the Securities Times said in a commentary today. The newspaper said that

China has tightened the control of capital flows and is becoming less tolerant

of yuan depreciation. China is not expecting a weakening yuan as the loss of

capital outflows caused by the devaluation will be far greater than the export

earnings obtained by a weak yuan, the commentary said.

     The PBOC intends to stabilize market expectations after last week's seizure

of a small lender by unusual injections of liquidity via reverse repo at

month-end, according to the China Securities Journal. The newspaper said that,

in general, the PBOC was unlikely to conduct reverse repo at the beginning or

end of a month, but it could be expected to use more instruments if money market

rates continue to climb.

--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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