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Corrective Cycle


Trend Signals Still Point North


BLOCK, Red Pack

     BEIJING (MNI) - The following are highlights from the China press for
Thursday, Dec. 28:  
     The growth of M2, a broad measure of money supply, is expected to fall to
around 9% in 2018 in China, and the growth of credit will also slow, as the
authorities try to tackle debt risk and curb asset bubbles, the 21st Century
Business Herald reported Thursday, citing analysts and economists. Growth in M2
has eased this year as a result of deleveraging in the financial sector. New
regulations for the wealth management sector will keep biting, so off-balance
sheet instruments and interbank business will continue to decelerate, making
double-digital growth in M2 next year hard to envision. The pace of corporate
loans is expected to remain stable considering that the authorities are
enhancing the financial sector's support of the real economy and that lending
costs are rising at a slower pace. But household credit will be under downward
pressure because of restrictions on mortgage loans and other controls on the
property market. (21st Century Business Herald)
     Tightness in structural liquidity conditions has appeared in the interbank
market as the People's Bank of China has skipped its open-market operations for
three consecutive days this week, the China Securities Journal reported
Thursday. The PBOC turned off its tap in the critical year-end period,
reflecting its bias toward tightness to control liquidity conditions with
consideration for strict regulation and deleveraging. But the structural problem
in liquidity allocation was already obvious, and the situation has been worse
than expected. Volatility in the bond and stock markets should increase next
year as tightness in structural liquidity becomes the norm. However, in the
first quarter, conditions may loosen to accommodate a marginal downturn in the
economy. (China Securities Journal)
     The property market will be more stable in 2018, compared with the heavy
destocking and tight controls of the past two years, the Economic Information
Daily said in a front-page commentary Thursday. The Central Economic Work
Conference emphasized an expansion of the rental market and improving effective
mechanisms for the long term, and both goals need to be pursued at a proper
pace. Financial regulators will continue to stop capital from flowing
excessively into the property market. Proposed property taxes that aroused so
much attention will not be implemented in the short term, the newspaper
predicted. (Economic Information Daily)
     The bond market is likely rebound early next year with loosened liquidity
conditions and higher demand for bond purchases, the China Securities Journal
reported Thursday. Stable monetary policy and softened growth in industrial
profits will boost the performance of the bond market, but it will not last
long, the newspaper projected. Two factors will drag down the momentum: strict
financial regulation and higher inflation before the Chinese New Year. Consumer
inflation in January is expected to be around 1.5%, accelerating further in
February because of a lower comparison base in the same period in 2017 and the
impact of the long holiday. (China Securities Journal)
--MNI Beijing Bureau; +86 (10) 8532 5998; email:
--MNI Beijing Bureau; +86 (10) 8532-5998; email:
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