PBOC To Maintain Prudent And Neutral Monetary Policy Stance

     BEIJING (MNI) - The People's Bank of China said it will maintain its

current "prudent and neutral" monetary policy to provide a neutral and

reasonable financial environment for supply-side reform, according to its second

quarter monetary policy report published Friday night.

     The PBOC affirmed that banking system liquidity conditions had remained

neutral in the second quarter under its the prudent and neutral stance, that

credit and social financing had shown reasonable growth, that the level of

interest rates were appropriate overall, and that expectations for the yuan

exchange rate were stable.

     The central bank's open market operations had generally limited

fluctuations in the level of liquidity, helping the money market and bond market

to operate in a steady fashion, and also helping the financial system to

deleveraging effectively, the report said. The most representative interbank

rate -- the seven-day deposit repo (drepo) rate -- fluctuated in a range of

2.75% - 3.0% in the second quarter, it noted.

     The PBOC said it will continue to improve its quarterly macro-prudential

assessments (MPA) of financial institutions' operations. In particular, the PBOC

will start to include negotiable certificates of deposit (NCDs) with durations

of less than one year issued by banks with assets of more than CNY500 billion as

part of its tests of the soundness of interbank liabilities in the MPAs starting

in the first quarter of 2018. The treatment of other NCDs has not yet been

determined.

     The PBOC said it will continue to implement a prudent and neutral monetary

policy to better manage the next stage of supply-side reform and to maintain a

proper, neutral financial environment. It also emphasized the importance of

preventing financial risks, of strengthening the coordination of financial

regulation, of improving the efficiency and capability of the financial sector

to serve the real economy, and of preventing any systemic financial risks from

happening.

--MNI Beijing Bureau; +86 10 85325998; email: he.wei@marketnews.com

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

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