MNI China Press Digest Dec 23: MLF Cut, Income Gap, High-Tech

The following lists highlights from Chinese press reports on Thursday:

• The People’s Bank of China may cut the medium-term lending facility rate in Q2 next year to guide a further reduction of the benchmark Loan Prime Rate, the China Securities Journal reported citing Liu Yu, chief fixed income analyst of GF Securities. The 5bps cut to LPR on Monday means a lower possibility for a further policy rate cut soon, as the central bank observes whether financing costs for the real economy are effectively reduced and demand is stabilised, the Journal said citing analysts. Liquidity conditions should be worry-free across the year as the PBOC has added 14-day reverse repos this week and about one trillion yuan of fiscal funds is expected to be released by the end of December, the newspaper said citing analysts.
• China should focus on the growing income gap to expand domestic demand and stabilise economic growth, said Yicai.com in an editorial. The epidemic has exacerbated income divergence as retail sales growth lags, while spending by the wealthy on luxury cars and expensive homes rose against the trend, the newspaper said. It is necessary to reduce the value-added tax of consumer goods paid by low- and middle-income groups and strengthen tax inspections on practitioners of Internet businesses to regulate excessively high incomes, the newspaper said. It is also important to boost credit, financing, and tax support for SMEs to safeguard the employment of lower income groups and guide companies to optimise employee incomes through equity incentives, the newspaper said.
• China is accelerating an upgrade to high-end industries while steadily advancing a low-carbon transformation, focusing on seven key areas including new energy, new materials, new energy vehicles, green smart shipment, environmental protection, high-end equipment, and energy electronics, the Economic Information Daily reported. Governments from ministerial to local levels are arranging policy and funding support and the output value of these related industries will reach CNY11 trillion by 2025, the newspaper said. It is also necessary to avoid repetitive low-level construction projects, and some provinces should suspend project planning in time, the newspaper said citing Mao Tao, an official from the Ministry of Industry and Information Technology.