MNI China Press Digest, Sept 27: Easing, Lending, Provision

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

on Friday:

     China still has sufficient room for monetary policy manoeuvring but any

decision on further interest rate cuts should come after closer observation of

the economy, Economic Information Daily said in a front-page commentary. While

monetary easing has had a significant impact on curbing the short-term decline

in the economy, it could also drive higher inflation and asset prices and hinder

the restructuring of China's economy in the long run, the commentary said.

     The PBOC is expected to use targeted reserve requirement ratio (RRR) cuts,

the medium-term lending facility (MLF), refinancing and rediscounting to boost

lending to private and small companies, the PBOC-run newspaper Financial News

reported citing unnamed sources. The PBOC may also lower MLF rates and increase

central bank bill swaps (CBS) to ease the liquidity, capital and price

constraints faced by medium and small banks, the newspaper said.

     Chinese banks are required to keep their loan loss provisions at around

150% and those with a rate which is double this requirement are suspected of

hiding profits, Shanghai Securities News reported citing a statement on the

website of the Ministry of Finance. Funds which are excess to these provisions,

which are set aside for bad loans, are required to be distributed to

shareholders in China. Securities News cited Zeng Gang, deputy director of the

National Institution for Finance & Development, who believes that banks should

still maintain a relatively high level of provision given the economic

pressures.

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

--MNI Sydney Bureau; +61 405322399; email: lachlan.colquhoun.ext@marketnews.com

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