MNI China Press Digest Oct 18: LPR, Foreign Investment, HK

Highlights from Chinese press reports on Wednesday:

• The October Loan Prime Rate is set to remain unchanged, as the anchor rate of medium-term lending facility was kept steady this week. Quoting banks lacked motivation to reduce LPR quotation, as policymakers guided banks to reduce the financing cost of the real economy and lower the existing housing mortgage rates, which have put their net interest margins under pressure, said Wang Qing, analyst at Golden Credit Rating. Wen Bin, chief economist at China Minsheng Bank added the current new and existing loan interest rates have already dropped significantly. The one-year LPR was reduced by 20bp to 3.45% during the year, and the five-year was reduced by 10bp to 4.2%. (Source: Securities Daily)
• China will further relax the threshold for foreign institutions to invest in financial asset management companies, according to a document released by the National Administration of Financial Regulation. Authorities will allow overseas non-financial institutions to serve as investors in domestic financial asset management companies and cancel the total asset requirements for overseas financial institutions intended to be an investor. The document will come into effect on Nov 10, 2023. (Source: China News Service)
• The Chief Executive of the Hong Kong Monetary Authority (HKMA), Eddie Yue, said on Tuesday there is no plan to change the currency peg to the U.S. dollar in an article published on the HKMA website, calling it the cornerstone of Hong Kong’s monetary and financial stability. Yue said the linked exchange rate system (LERS) has helped Hong Kong weather a succession of shocks and crises, as well as many severe challenges since it was introduced in 1983. Yue noted that whether or not Hong Kong implements the LERS does not seem to be the most critical factor, as many other economies and financial centres are also feeling the pain of high interest rates, even without adopting a fixed exchange rate.