MNI Policy: China Financial Risks Set To Crystallise: PBOC

     LONDON (MNI) - China still faces arduous challenges on structural reform

and financial risks under pressure generated by external uncertainties and the

domestic slowdown, the People's Bank of China noted in its 2018 China Financial

Stability Report released on Friday.

     Some "grey rhino" events, obvious but ignored financial risks, are still

likely to happen next year, the report warned. Nevertheless, the economy will

remain large and resilient and market-oriented liberalisation policies will be

implemented.

     The report reaffirmed the neutral stance of monetary policy. It addressed

the issues of controlling the floodgates of money supply, maintaining suitable

credit growth and social finance and keeping the yuan exchange rate stable at a

reasonable and balanced level.

     The country needs to pay attention to high leverage ratios, particularly

that of state-owned companies and the local government debt raised by funding

vehicles, the report said. It stated that debt-to-equity swaps should be

promoted to deal with the debt problem.

     Regulators will enhance the control on shadow banking and block illegal

funding channels in an effective way, the PBOC said.

     Property sector leverage should also be a concern even though the strict

regulations have managed to curb roaring house prices, according to the report.

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

[TOPICS: M$A$$$,M$Q$$$]