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MNI China Press Digest: Monday, Dec. 11

     BEIJING (MNI) - The following are highlights from the China press for
Monday, Dec. 11
     The CChina Banking Regulatory Commission will further suppress the growth
of interbank asset transactions while encouraging an expansion of banks' lending
businesses, the Financial News, the journal run by the People's Bank of China,
reported Monday. According to a draft released last Wednesday by the CBRC to
solicit public opinion, the supervision of banks' liquidity situations will be
strengthened. Small and medium-sized banks have generated a large liquidity risk
as half of their liabilities are funding raised through wholesale interbank
transactions, a risk worsened by high leverage ratios and mismatched durations,
the report said. The draft will set quotas for interbank wholesale funding of
different durations, which will restrain the mismatches, the report noted.
Long-term liabilities will increase as banks focus on curbing short-term
interbank transactions to meet regulatory requirements. (Financial News)
     China needs to give up its pursuit of rapid economic growth so that it can
realize higher-quality development, the Economic Information Daily said Monday
in a front page commentary in response to the Politburo meeting held last
Friday. The meeting emphasized the need for the nation to build a long-term
effective mechanism for property market control and accelerate the reform of the
residential housing system. This means real estate market reforms will see a
breakthrough in 2018, particularly in terms of increasing housing supply,
developing rental housing, and pushing forward reforms of fiscal policy and the
household registration system, the commentary noted. Although the economy's
overall leverage ratio is declining, it remains high, particularly in the
household sector, the commentary warned. The property market bubbles in Tier 1,
Tier 2 and Tier 3 cities need to be further curbed, the commentary argued.
(Economic Information Daily)
     The profitability of Chinese banks is expected to improve next year due to
higher interest margins and lower credit costs, the Financial News, a journal
run by the People's Bank of China, reported Monday. Net profits of listed banks
are predicted to rise 6.61% year-on-year in 2018, compared with 4.3% growth this
year, the report said, quoting industry insiders. Money market rates will
continue to rise as liquidity is tightened further under pressure from financial
deleveraging and stricter regulation, so the interest margins of big banks will
increase further, the report noted. Credit costs will decline as non-performing
loans are resolved. Bank provisions are growing, providing support for managing
their NPLs, the report argued. But banks will also face bigger structural
adjustment challenges as additional operating risks are exposed next year.
(Financial News)
     The People's Bank of China's market interest rates have not yet fully
evolved because the economy is facing downturn pressure, inflation is still mild
and funding costs are rising, Lian Ping, chief economist with the Bank of
Communications said Saturday at a financial summit in Hainan Province. Economic
growth in 2018 is expected to be around 6.7%, as better exports offset lower
investment growth, with consumption stable, Lian predicted. It will be difficult
for the PBOC to tighten monetary policy further given gloomy market expectations
and the pressure on financial institutions to adapt to new regulations.
Nevertheless, the PBOC is likely to raise the interest rates on its liquidity
instruments next year to offset the effects of expected Federal Reserve's rate
hikes next year, Lian argued. (China Securities Journal)
--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com
--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com
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