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MNI China Press Digest Nov 25: RRR Cut, Yuan, Real Estate

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MNI summarises the key stories from the Chinese press.

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The following lists highlights from Chinese press reports on Friday:

  • The urgent need to cut banks’ reserve requirement ratio is rising as China should move to stabilise growth in Q4, which is the biggest contributor to yearly growth, China Securities Journal reported on its front page. A 25-50 bp cut to release CNY500 billion to CNY1 trillion in medium and long-term funds can be expected, the newspaper said citing CICC analyst Lin Yingqi. A RRR cut will send an easing signal and reduce banks’ capital costs, which may drive down banks’ December quotations on the 5-year Loan Prime Rate that they price mortgages on, the newspaper said citing analysts. Residential loan growth remains sluggish, with the property sector set to become an important destination for banks’ credit, the newspaper cited analysts as saying.
  • The yuan remains stable despite expectations the People’s Bank of China will cut banks’ reserve requirement ratio in coming days, The 21st Century Business Herald reported, citing CITIC Securities chief economist Ming Ming. He said a U.S. dollar rebound will not cause the yuan to break through its previous low due to the improving domestic economy, slowing capital outflows, and the backlog of year-end foreign exchange settlements. The article cited traders noting that the China-U.S. interest rate differential is narrowing, giving no strong support to short the yuan even as the expected RRR will see a divergence in monetary policy between China and the U.S.
  • Large state-owned banks reached cooperation agreements with property developers to provide credit, following this week's joint pledge by top regulators to increase financial support for the sector, reported financial news agency Cls.cn. As of Thursday, six major state-owned banks agreed to provide credit lines totalling CNY1.275 trillion to 17 developers, with Industrial and Commercial Bank of China lending to 12 of them, Cls.cn said.
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The following lists highlights from Chinese press reports on Friday:

  • The urgent need to cut banks’ reserve requirement ratio is rising as China should move to stabilise growth in Q4, which is the biggest contributor to yearly growth, China Securities Journal reported on its front page. A 25-50 bp cut to release CNY500 billion to CNY1 trillion in medium and long-term funds can be expected, the newspaper said citing CICC analyst Lin Yingqi. A RRR cut will send an easing signal and reduce banks’ capital costs, which may drive down banks’ December quotations on the 5-year Loan Prime Rate that they price mortgages on, the newspaper said citing analysts. Residential loan growth remains sluggish, with the property sector set to become an important destination for banks’ credit, the newspaper cited analysts as saying.
  • The yuan remains stable despite expectations the People’s Bank of China will cut banks’ reserve requirement ratio in coming days, The 21st Century Business Herald reported, citing CITIC Securities chief economist Ming Ming. He said a U.S. dollar rebound will not cause the yuan to break through its previous low due to the improving domestic economy, slowing capital outflows, and the backlog of year-end foreign exchange settlements. The article cited traders noting that the China-U.S. interest rate differential is narrowing, giving no strong support to short the yuan even as the expected RRR will see a divergence in monetary policy between China and the U.S.
  • Large state-owned banks reached cooperation agreements with property developers to provide credit, following this week's joint pledge by top regulators to increase financial support for the sector, reported financial news agency Cls.cn. As of Thursday, six major state-owned banks agreed to provide credit lines totalling CNY1.275 trillion to 17 developers, with Industrial and Commercial Bank of China lending to 12 of them, Cls.cn said.