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REPEAT: MNI: China Must Boost Infrastructure Finance: Advisor

MNI (London)
Repeats Story Initially Transmitted at 11:20 GMT Mar 5/06:20 EST Mar 5
     BEIJING (MNI) - China must tackle structural reform of the financial sector
and establish a special channel for financing infrastructure projects, a leading
Chinese government advisor told MNI Tuesday.
     Much of the economy's slowdown was due to problems of financing
infrastructure problems not yet having been tackled, said Li Daokui, a member of
the economy committee of the Chinese People's Political Consultative Conference
(CPPCC), pointing to negative real infrastructure investment growth in 2018.
     Li also pointed to divergence between interbank markets and exchange traded
bonds, seeing the lack of integration contribute to problems seeing monetary
policy transmitted to the real economy.
     --TRANSMISSION ISSUES
     "For interest rates in the money market to be transmitted to the loan
market, they need to go through fixed-income operations or bond market. But now,
the two markets are not aligned, so it's hard (for such transmission)," said Li,
a former member of the People's Bank of China monetary policy committee.
     Banks must also address their risk profile, particularly bad loans, to
properly address transmission issues, Li added, so liquidity could flow through
to small and micro businesses.
     "If banks can't remove risks of bad loans, they are unable -- nor dare --
grant too many loans," he said. However, he did say perhaps a more lenient
enforcement of NPL ratios by the authorities was needed.
     "Rules that financial institution executives should for their life be
responsible for bad loans, I think this needs to be adjusted," Li noted, as such
rules hinder lending to companies with weaker balance sheets and firms without
strong support of the government.
     Li also told MNI the stock market reform should be another part of China's
financial structural reform, with stricter enforcement of of the law needed
against transgressors.
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com

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