MNI China Press Digest: Thursday, Dec. 28

     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: marissa.wang@marketnews.com

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

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