MNI China Press Digest May 29: Reserve Ratio Cut, WMP

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

Tuesday:

     The PBOC may cut RRRs for banks in June or July in exchange for other

demand, China Securities Journal said. The central bank is expected to increase

liquidity injection in June or July to relieve seasonal liquidity shortages,

said the newspaper. Financial regulations and forex purchase are expected to

affect liquidity in the next two months, the newspaper said. Banks may be

required to increase their required reserves as they are expected to increase

deposits at the end of the quarter, the newspaper said. Money supply won't

change significantly, the journal said.

     China's banking regulators may soon publish rules on banks' structural

deposit products, a type of WMP with interest rate linked and affected by prices

of a financial derivative, Securities Daily reported. Banks are increasingly

using structural deposit products to replace previous WMPs with promised

interest rates for consumers after new WMP rules were issued, the daily said.

More regulations are needed to curb such illegalities, the newspaper said citing

analysts including Wu Wen, senior researcher at the financial research center of

Bank of Communications.

     The China Banking and Insurance Regulatory Commission is speeding up

process of creating specific rules for banks' WMP business, China Securities

Journal said citing Li Wenhong, director of the regulator's innovation

department. The rules would follow main regulations of the new WMP rules issued

at the end of April, but specify requirements for banks' WMPs, the newspaper

said citing Li. Risk controls of financial institutions should be enhanced,

banks' bad loans are still of concern and may rebound; cross-market risks still

exist, Li was reported as saying by the newspaper.

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

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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