China Press Digest: Tuesday, Nov. 14

     BEIJING (MNI) - The following are highlights from the China press for

Tuesday, Nov. 14

     China should seize the current chance to deepen market-oriented exchange

rate reform, Guan Tao, former head of the balance of payments division at the

State Administration of Foreign Exchange (SAFE) and now a research fellow with

the 40Forum think tank, said in a commentary published Tuesday in the Financial

News, a journal run by the People's Bank of China. Reform of the yuan exchange

rate formation mechanism should include optimizing the central parity

calculation method, widening the volatility range of the yuan and increasing the

flexibility of the exchange rate, Guan noted. The reform should develop the

foreign exchange market by relaxing restrictions, Guan suggested. Market

dynamics will not have a chance to work unless the country increases access for

market participants with different risk appetites, increases the number and type

of forex trading products on offer and lifts controls on real demand for foreign

exchange, Guan warned. The dominant role of the market needs to be built up or

the market will never be able to operate without the assistance of the central

bank, Guan argued. (Financial News)

     The bond market will remain bearish in the near term given current

pessimistic market sentiment due to signs of robust economic growth and

uncertainty about future financial regulation, the China Securities Journal

reported Tuesday. After the big correction in October, commercial banks have

started to increase their holdings of Chinese government bonds (CGBs), the

report noted. If economic indicators show an obvious slowdown, institutions

further increase their CGB holdings, and new regulations are launched soon to

clear up uncertainty, there is a chance for the bond market to rebound at end of

this year or in the first quarter of next year, the report argued. Also weighing

on the market, the Federal Reserve is expected to hike its interest rate in

December and the Chinese government's annual economic work conference next month

will probably signal some policy adjustments, the report noted. (China

Securities Journal)

     Property market demand is sluggish due to strict government controls even

though supply is increasing, the 21st Century Business Herald reported Tuesday.

Sales volume of second-hand houses in Beijing fell 73% on annual basis and 31%

month-on-month in October, a month that includes the week-long National Day

holiday that is traditionally a strong sales period, the report said. Tight

restrictions and weak sale performance have caused housing agent confidence to

drop for the first time in three months. The property market slowdown is

expected to accelerate in the months ahead, with no recovery at least until the

middle of next year, the report noted. (21st Century Business Herald)

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

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

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