MNI China Press Digest: Monday, Nov. 27

     BEIJING (MNI) - The following are highlights from the China press for

Monday, Nov. 27.

     With monetary policy transitioning to price-dominated management, the

central bank's control of money market rates needs to be further improved, the

Financial News, a journal run by the People's Bank of China, reported Monday on

its front page. The duration structure of money market rates needs to be

reformed to better influence long-term rates, the report said, citing analysts.

The PBOC's monetary instruments have helped optimize the benchmark yield curve

and accelerate the transmission of monetary policy. The expansion of the bond

market and the reduction in the required reserve ratio could also make bond

rates and credit rates more sensitive to policy signals, the report argued. The

macro-prudential framework should include cross-border capital flows in its

macro-prudential assessments and strengthened controls of the property market to

allow for differential policies to respond to varying situations among cities.

(Financial News)

     The low growth of M2 money supply will not have a large negative influence

on the economy and the importance of stabilizing liquidity and securitizing

financial sector risks has not changed, the People's Daily said in a commentary

Monday. The deceleration of M2 growth has been a result of financial

deleveraging and effect of the movement of deposits out of instruments included

in the M2 gauge as financial innovation has diversified savings options, the

commentary noted. Given the background of prudential monetary policy, a proper

level of M2 will be maintained with the support of various policy tools, the

commentary argued, adding the market should not over-react to M2's current

performance. (People's Daily)

     Regulators are expected to tighten controls on consumer loan asset-backed

securities as issuance of those instruments in the exchange market has surged by

five times in the past year, the Economic Information Daily reported Monday. The

new issuance of consumption finance this year has accounted for over 30% of the

total newly-issued ABS of CNY1 trillion as of Nov, 23. But a large amount of

these ABS have been issued in the exchange market, which means they are out of

the control of authorities, the report noted. This could trigger default risk

due to lack of transparency, poor risk assessment as well as weak risk controls

by issuers, the report warned. (Economic Information Daily)

     The property market in China is undergoing a transition as controls on

property sales tighten and rental house policy is pushed forward, the Xinhua

News Agency reported Sunday. The toxic circle of "tighter controls, higher

prices" is expected to be broken because rising housing prices have been reined

in, policies to reduce inventories of unsold houses have worked, while financing

controls and the provision of new land for development have curbed speculation,

the report said. Half of residential housing problems in big cities can be

solved by housing purchases and half through rental housing, the report argued.

The emphasis on both housing purchases and rental housing will be a long-term

policy for the property market, the report said. (Xinhua)

--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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