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

[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]