MNI China Press Digest, Sept 20: MonPol, Deposit, Local Bonds

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

Thursday:

     China's monetary policy should not be regarded as powerful a tool as

before, as that belief has significantly affected China's economy in the past

years, Economic Information Daily said in a commentary. Many problems within

China's economy were fundamentally due to the previous growth model that overly

emphasised growth speed and a loose monetary policy, the newspaper said.

Frequent use of structural tools could result in too much money supply, and is

not in line with the prudent and neutral characteristics of monetary policy. The

balance of policy targets should be reached by various measures and deepening

reforms, instead of relying solely on monetary policy, the commentary said.

     The slowing growth of yuan-denominated deposits in Chinese banks is

expected to continue in the future, as growth will not have too much room to

rise, Economic Information Daily reported on Thursday, citing experts.

Yuan-denominated deposits increased 8.3% y/y to CNY175.24 trillion in August,

0.2 and 0.7 percentage points lower than July and last August, the newspaper

said, citing data from the PBOC. Wealth management products (WMPs) have

attracted some of these deposits due to the WMPs' high returns, the newspaper

said, citing experts including Dong Ximiao, senior researcher at Renming

University's Chongyang Institute for Financial Studies. The slowing of the

deposit growth rate may not be a bad thing as China's banking assets are three

times the value of its GDP, and it is likely that banks will shrink their

balance sheet in the future, the newspaper said, citing Zeng Gang, director of

the banking research office of China Academy of Social Sciences.

     Local government bond issuance has reached CNY1.5 trillion so far this year

on Shanghai Stock Exchange alone, Securities Daily reported. It took only a

month for the issued bonds to increase to the current level from CNY1 trillion

on August 20, the newspaper said. The surge was due to the central governments'

recent policies to speed up issuance of special bonds to encourage investment, a

researcher of a security was cited as saying. The Shanghai Stock Exchange is

improving the trading system for local government bonds and is enhancing

liquidity of such bonds, the newspaper said, citing an unidentified source.

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

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

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