MNI China Press Digest, Oct. 15: PBOC Yi, RRR Cut, Housing

     BEIJING (MNI) - The following lists highlights from the Chinese press for

Monday:

     There still is considerable room for monetary policy adjustment, including

changes in interest rates, reserve ratios and monetary conditions, said Yi Gang,

governor of People's Bank of China (PBOC), during his speech at the G30

International Banking Seminar on Sunday, according to the newspaper National

Business Daily. The trade frictions with the U.S. will lead to negative

expectations and uncertainties, which will cause tension in the market, said Yi;

but Yi is also confident that the monetary policy tools at hand are sufficient

to deal with these uncertainties. China's current economic growth is stable, and

is expected to reach or even slightly exceed the target of 6.5% set for this

year, Yi reiterated.

     The 1% reserve requirement ratio (RRR) cut that will take effect on Monday

may not have as direct an impact on liquidity as the media reports, reported the

newspaper The Paper, citing the China International Capital Corporation (CICC).

The actual impact of the RRR cut will also depend on the size of the liquidity

injected by the PBOC's open market operations (OMO) in the future, CICC said,

considering that the current balance of OMOs is as high as CNY9.26 trillion, of

which more than CNY600 billion will mature in October. There will be CNY451.5

billion in medium-term lending facilities (MLF) and another CNY150 billion of

treasury deposits maturing this week, with no reverse repos expiring. Thus, in

addition to the replacement of MLF, the RRR cut will release incremental funds

of another CNY750 billion, the newspaper said, citing Wind Information.

     Curbing real estate speculation and the housing bubble is a long-term and

arduous task, and thus the government should consider introducing consumption

tax, turnover tax, vacancy tax, or even property tax, said Qiu Baoxing, the

State Council counselor and the former Deputy Minister of Housing and

Urban-rural Department, according to the Economic Daily on Monday. The

implementation of property tax can be held off for another five years, while the

other three taxes should be implemented first, so as to "flatten" rather than

"puncture" the real estate bubble, Qiu said. This will help maintain the

consumption power and the wealth of residents, Qiu added. The housing vacancy

rate in China is relatively high -- the rate in cities like Ordos in the Inner

Mongolia region reaches as high as 70%, while that of Beijing falls between 10%

to 20%. In countries that have introduced the vacancy tax on empty housing, the

rate is around 5%, Qiu said.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI Beijing Bureau; +86-10-8532-5998; email: beijing@marketnews.com

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