August 14, 2017 / 3:22 AM / 2 years ago

HIGHLIGHTS-China c.bank's Q2 monetary policy implementation report

BEIJING, Aug 14 (Reuters) - Here are highlights of China’s central bank’s second-quarter monetary policy implementation report released late on Friday:

MONETARY POLICY OUTLOOK:

* The People’s Bank of China will maintain its “prudent and neutral” monetary policy to provide a neutral and appropriate financial environment for supply-side reforms.

* It will strike a balance between deleveraging and maintaining stable liquidity and make its open market operations more forward-looking, flexible and precise to smooth out volatile changes in liquidity.

* It will fend off financial risks and step up coordination on financial regulation. It will carry out the duties of the office of a new Financial Stability and Development Committee under the cabinet

FUNDING COSTS:

* The weighted average lending rate for non-financial firms, a key indicator reflecting corporate funding costs, rose 14 basis points in the second quarter to 5.67 percent, following a rise of 26 basis points in the first quarter to 5.53 percent.

YUAN EXCHANGE RATE:

* PBOC will keep the yuan basically stable within a reasonable, balanced range and further improve the market-based exchange rate regime. It will let market forces play a bigger roles in setting the exchange rate and increase two-way currency flexibility.

* It said that the “counter-cyclical factor” introduced in late May helped the yuan’s mid-point regime become more market driven, more transparent and rule-based.

* Under the new regime, each bank can use its own quotation and public market data to calculate and verify the actual release of the mid-point. All data related to the calculation of the “counter-cyclical factor” is from public market information or determined by the quotation of each bank, and is not subjected to third-party intervention.

OPEN MARKET OPERATIONS

* The PBOC said it would usually inject more funds during the middle of the month given relatively tight liquidity around that period while tightening injection near the end of month.

* The central bank will study increasing the tenor types of reverse repos, to keep liquidity in the interbank market basically stable, neutral and appropriate.

MPA

* The PBOC will continue to improve its quarterly macro-prudential assessment (MPA) of financial institutions’ operations.

* The PBOC will start to include negotiable certificates of deposit (NCDs), tenors within one-year, issued by banks with assets of more than 500 billion yuan ($75.11 billion) from the first quarter of 2018. It said the move would better reflect banks’ reliance on interbank financing.

ASSET MANAGEMENT

* The PBOC estimated the overall asset management industry was worth more than 60 trillion yuan at the end of 2016. It will establish an MPA framework for the asset management industry

* China lacks sufficient regulations on shadow financing

* It will strengthen liquidity risk control and promote the healthy development of the asset management industry($1 = 6.6568 Chinese yuan) (Reporting by Stella Qiu and Kevin Yao; Editing by Jacqueline Wong)

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