MNI POLICY: China Bank Regulator Vows to Limit Debt Ratios

     BEIJING (MNI) - Here are the key points from a Beijing press briefing given

by three officials from China Banking and Insurance Regulatory Commission

including Vice Chairman Wang Zhaoxing to underline continued monitoring of risks

from high leverage levels:

     --Over the last two two years, China has restricted growth in financial

transactions, with bank total assets growing at about 7% over the period, down

from 15% previously. China met the target for structural deleveraging, curbing

CNY3.48 trillion in bad debt. Shadow banking and cross-financing risks are

declining, with high-risk assets falling by CNY12 trillion in the last two

years. 

     --Local governments will need to increase borrowing to fund measures to

"improve people's lives", providing welfare service, whilst enterprises will

need to fund future operations. China's financing structure is such that

bank-provided financing will be the primary indirect source of funding, ahead of

direct sources of funding, including capital market. 

     --On managing leveraging, regulators will apply the principles of the debt

raised being "resolute, controllable, orderly and appropriate." China will

ensure new debt meets those requirements, continuing to reduce NPLs. It will

also strictly control debt flowing to property sector speculation. 

     --To help small businesses obtain financing, regulators cut interest rates,

introduced lending incentives for banks and reduced fees for small business loan

applications. Outstanding loans held by small businesses totalled CNY33.5

trillion. 

     --Regulators will monitor risks in the following areas: non-performing

loans, which are at risk of increasing as the economy slows; liquidity risks of

smaller banks given slowing growth; shadow banking undertakings including

arbitrage and debt levels; lending across the property sector and local

government debt financing.

     --The regulators are probing the jump in usage of bank bills by speculators

for arbitrage in January, saying they will crack down on those that have no

underlying real economic activity. The regulators said they will ensure its

systems for managing bank bills is robust enough to prevent outright

speculation. 

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

[TOPICS: M$A$$$,M$Q$$$,MI$$$$,MBQ$$$,MGQ$$$]