MNI China Press Digest: Tuesday, Dec. 26

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

Tuesday, Dec. 26

     China's deleveraging campaign should focus next year on nonfinancial

state-owned companies, particularly "zombie" companies, to improve productivity,

Huang Yiping, an academic and a member of the Monetary Policy Committee of the

People's Bank of China, said in an article published Monday on the website of

the Finance40 Forum, an official think tank. The leverage ratio of state-owned

enterprises has barely changed even as the overall campaign has had unexpected

success. "Zombie" companies -- money-losing companies that rely on government

support -- exist because government guarantees are implicit. China can continue

to improve efficiency in the financial sector through curbing shadow banking,

reducing growth in the so-called M2 money supply and increasing direct funding,

Huang wrote.

     China will take measures to increase consumption and stabilize foreign

trade in 2018, Commerce Minister Zhong Shan has said, the Economic Information

Daily reported Tuesday. The measures include cultivating cross-border

e-commerce, building high-level trade platforms, facilitating trade and

continuing a proactive export policy, Zhong said Monday at the National Commerce

Work Conference. By 2020, China will consolidate its place as a major trading

nation; by 2035, it will begin to become a trading power; and by 2050, it will

establish itself as wide-reaching trading power, Zhong said. During the first 11

months this year, the total volume of goods traded rose 15.6% year-on-year, the

fastest pace in six years, and exports exceeded imports in the service sector

for the first time, Zhong noted. (Economic Information Daily)

     The Chinese bond market is expected to continue to be sluggish in 2018 as

liquidity conditions in the interbank market remain tight, the China Securities

Journal reported Tuesday, citing officials and economists. As of the end of the

third quarter of 2017, the average excess reserve ratio of commercial banks had

dropped to 1.3%, the lowest in six years. Banks' deposits and wealth-management

capital also have steadily declined this year. In 2018, bond yields are expected

to rise because of the effects of domestic and international factors, but the

bond market most likely will not suffer a sharp correction, like in the past two

years. (China Securities Journal)

     Issuance of local government bonds is expected to grow in 2018 with a

probable surge in a newer special bond, the 21st Century Business Herald

reported Tuesday. Issuance of the special bond is predicted to reach CNY2.3

trillion next year, CNY670 billion more than in 2017, the newspaper said, citing

bond analysts. Special bond issues doubled to CNY800 billion in 2017 from 2016.

Issuance of local government bonds has shrunk this year as rates rose because of

tight financial regulation, totaling CNY4.36 trillion as of Dec. 25, compared

with CNY6.05 trillion in 2016. (21st Century Business Herald)

--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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