MNI China Press Digest Oct 19: Local Govt Bonds, LPR, Debt

The following lists highlights from Chinese press reports on Monday:

China has allowed Shenzhen to issue government bonds in the overseas offshore yuan market as a trial, The Paper reported citing the notice from the National Development and Reform Commission. The issuance of yuan bonds in foreign markets by local governments will effectively release local financial pressure, promote the internationalization of the Yuan, and increase the liquidity and risk resistance of local debts, the Paper reported citing Wang Yuanwei, an analyst from the National Development Bank.

The PBOC is likely to keep the loan prime rate unchanged when it issues its monthly quotation guidance on Tuesday, the Securities Daily reported citing market analysts. The central bank has kept the rate of medium-term lending facilities unchanged this month, an indication that it intends to maintain the current interbank rates, the Daily said. Banks also lack the motivation to lower the October LPR quotes they submit to the PBOC as the average marginal cost of funds hasn't changed significantly, the newspaper said citing Wang Qing, chief analyst at Golden Credit Rating. The one-year LPR has dropped 30 bps so far this year to 3.85%, while the five-year LPR sits at 4.65% after decreasing 15 bps.

China's increased financing support in areas such as manufacturing and infrastructure has led to an increase in medium-to-long term loans which totaled CNY 1.9 trillion in September, up CYN 20.47 billion y/y, the Financial News reported on Monday citing Yuan Xiaohui, a researcher from the BOC Research Institute. The increasing share of medium to long term loans in the credit structure will require banks to balance assets and liabilities to counter the effects of interest rate fluctuations and provide ample liquidity and capital when needed, Yuan said. Medium-to-long term loans to residents are likely to decrease in October due to new housing loan limitations, and loans to businesses are likely to maintain the increasing trend, the News cited Wang Qing, an analyst from Golden Credit Rating.