MNI China Press Digest, Feb 27: Yuan, OMO, Outbound Investment

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

Tuesday:

     The yuan will continue to see two-way fluctuations in the near future,

reported China Securities Journal. The yuan closed higher at 6.3070 on Monday,

due to more market activities after the Chinese New Year holiday and the fact

that the dollar is adjusting at a weakening curve. Though the U.S. dollar will

continue be a key factor influencing the yuan exchange rate, the market broadly

believes the dollar does not have enough room to rise to a large degree.

Alongside China's resilient economic fundamentals and expectations for a stable

yuan, this means the yuan will maintain a stable status.

     People's Bank of China is likely to increase interest rates of open market

operations, as the U.S. Fed is expected to increase the benchmark interest rate

in March, China Securities Journal reported. If the rate does increase, it would

not be by much - likely 5 basis points. Because the market is already signaling

this rate increase - with, for example, the PBOC's statements in its

fourth-quarter Monetary Policy Report - the impact of the OMO interest rate hike

will be limited. China's monetary policy in the near future will remain prudent

and neutral, the newspaper said.

     Chinese companies' outbound investment should not pursue improvements in

just speed and volume, but also in quality, reported the official People's

Daily. China issued a few documents regulating outbound investment, including

one issued earlier this month that listed property, hotel, cinema, sports clubs,

weapon manufacturing and maintenance, cross-border water development and use,

and journalism and media as sensitive sectors in which the government would

control outbound investment. Ministry of Commerce official Bai Ming said that

China has been issuing more detailed regulations such as this one. China's

outbound investment in the first ten months this year would remain "abundant"

and "stable": Bai Ming. Unreasonable mergers and acquisitions, as well as

companies' transfers of assets abroad in the name of outbound investment, will

both continue to be curbed. The government will continue to ensure the legality

and authenticity of outbound investment.

--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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