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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)
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