Regulators could consider setting up....>

CHINA PRESS: Regulators could consider setting up a new multilevel reserve

requirement system to reduce pressure on liquidity and avoid the negative

effects of the current reserve requirement system, Zong Liang, chief economist

at Bank of China, said in a commentary published Thursday in the Financial News,

a journal run by the People's Bank of China.  Zong suggested China could have

two levels of deposit reserve requirement, a legally required minimum deposit

reserve ratio of 7% and a voluntary adjusted one with a ratio of 10%. Commercial

banks could borrow from the central bank using the additional adjusted reserve

money stored at the central bank as collateral, Zong said. Monetary policy

should focus on guiding market expectations and deleveraging at a moderate and

stable pace in the second half of this year. The central bank should increase

its injections of medium- and long-term capital via the Medium-term Lending

Facility, particularly as regulations tighten and key macro-prudential

assessments occur, Zong noted. Deleveraging the real economy is the key and

macroeconomic policy needs to balance deleveraging with liquidity stability,

Zong added. (Financial News)