MNI China Press Digest: Thursday, Nov. 16

     BEIJING (MNI) - The following are highlights from the China press for

Thursday, Nov. 16

     The China Banking Regulatory Commission on Wednesday set new capital

adequacy guidelines for the government's three policy banks, the Financial News,

a journal run by the People's Bank of China, reported Thursday. The three policy

banks -- the China Development Bank, the Export-Import Bank of China, and the

Agricultural Development Bank of China -- have been highly reliant on bond

issuance due to a lack of other stable and low-cost capital sources, which harms

their capacity to withstand risks and restrains their sustainable growth, the

report said. This is the first time the government has imposed capital

requirements on the policy banks, the report noted. (Financial News)

     The modest growth of China's foreign exchange reserves in recent months is

hardly sustainable and has not created strong support to liquidity in the

interbank market, the China Securities Journal reported Thursday. The yuan

exchange rate is likely to suffer depreciation pressure and foreign exchange

reserves could decline in the period ahead given the Federal Reserve is expected

to raise its interest rate in December and capital outflows are likely to

increase at the end of the year, the report warned. The People's Bank of China

has reduced its intervention in the foreign exchange market, which means the

forex position will not see a big jump, the report argued. The open market

operations of the PBOC will focus on the effects of fiscal spending and the

forex position, so liquidity will remain tightly balanced, the report noted.

(China Securities Journal)

     It is time to build up a long-term property market mechanism to implement

the principle that a "house is for living in, not for speculating on", the

Economic Information Daily said in a front page commentary Thursday. The policy

and capital sides of the market are ready to launch such a mechanism, the

commentary argued. As financial deleveraging has progressed, the flow of capital

into the property market has been curbed and speculation has shrunk, the

commentary said. A series of new government policies, including those supporting

joint-ownership houses and rental housing, is optimizing housing resources.

Regulators have started to ban the use of consumer loans to acquire property, so

the property market is moving forward in a healthier way, the commentary

stressed. (Economic Information Daily)

     Credit risk is likely to increase in 2018 due to pressure from slowing

growth, falling producer prices and a peak in corporate profits, the 21st

Century Business Herald reported Thursday. As of the end of October, there have

been 32 corporate bonds defaults in both public and private markets so far this

year, the report said, citing China Chengxin International Credit Rating Co.,

the largest credit rating agency in China. The number of defaults have decreased

compared to 2016 due to better economic performance and improving industrial

profits, the report noted. But stricter financial regulation and a tight funding

environment will trigger more credit risk cases, the report warned. (21st

Century Business Herald)

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

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com

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