MNI: China Press Digest, Feb 23: Yuan, Mon Pol, Financing

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

Friday:

     The yuan central parity this year is expected to remain reasonably

balanced, and to maintain its two-way fluctuation status, said Economic

Information Daily in a front-page report on Friday. The yuan closed at 6.3605 on

Thursday, the first trading day after the Chinese New Year holiday, dipping 164

BP. This is mainly due to the rebound of the US dollar: Fan Ruoying, researcher

at Bank of China Global Economy Research Institute. As the dollar remains

classified as 'weak', while China still has strong fundamentals and stable

policies, the yuan is expected to remain balanced.  

     China's monetary policy is expected to remain neutral and balanced after

the Chinese New Year, reported Securities Times on Friday. Liquidity remains

stable and is slightly loose after the PBOC on Thursday injected CNY350 billion

liquidity into the market via open market operations. Non-bank institutions

still face pressure in terms of money supply. As the Chinese New Year holiday

ends, tools which were used to inject liquidity will steadily be withdrawn,

increasing liquidity uncertainty. However, most financial institutions predict

stability in liquidity after the holiday. In the short term, the PBOC is

expected to inject liquidity to maintain stability in the money market rate. The

PBOC stated the benefits of increasing the rate of OMOs in its fourth-quarter

monetary policy report. The market expects that the central bank will likely

continue increasing OMO rates this year.  

***COMMENTS: The PBOC is likely to increase OMO rates or even the benchmark

interest rates this year, especially while the US Fed is expected to keep

increasing interest rates.  

     Companies' refinancing cost will increase as six credit bonds have already

defaulted so far this year, reported China Securities Journal on Friday.

Refinancing cost is expected to increase, as current interest rates have

increased, non-standard financing channels are restricted, and the regulation on

financing is tight. Though risks have emerged in the first two months, a

large-scale bond default wave will not happen: China's economic fundamentals are

strong and companies are seeing growth in their profits. However, regulators

should continue to clamp down on practices of promising specific yields or

return of capital for investors.  

***COMMENTS: Financing environment is expected to remain tight this year -

especially for sectors under tighter control, such as the property sector.

Property companies' financing and refinancing are under high pressure.

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

--MNI Beijing Bureau; +86-10-8532-5998; email: beijing@marketnews.com

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