MNI China Press Digest Feb 9:

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

Monday:

     China's foreign exchange agency (SAFE) will lift some restrictions on

Qualified Foreign Institutional Investors (QFII) and provide hedge tools to

qualified institutions in a bid to facilitate capital flows, said Guo Song,

director-general of SAFE's capital account management department, over the

weekend in China Forex, a journal run by SAFE. The country will clarify the

forex management relevant to Panda bonds and further improve the convertibility

of capital accounts, Guo noted. Comment: China had strictly controlled the

approval of new investment quotas under the QFII programme in the past two years

to stem capital outflows, as the yuan was weighed down by high depreciation

pressures. SAFE is expected to relax some capital controls this year to further

open up its capital account.

     The People's Bank of China should further coordinate macro-prudent

regulations and controls on operations of market players to stem frequent

financial issues, wrote Xu Zhong, director of the PBOC Research Bureau, in an

article published on the Finance 40 Forum website on Sunday. The regulatory

arbitrage, messy off-balance-sheet transactions and illegal fund-raising in

recent years indicate the contradiction between separated financial supervision

and mixed operations, Xu said. Comment: In practice, the responsibility of the

PBOC has mainly been to provide bailouts, instead of actual supervision. This

makes dealing with financial problems costly, and hardly prevents and resolves

financial risks at an effective pace.

     The authorities should stabilise market expectations when the ongoing

deleveraging campaign goes deeper and more complicated, Economic Information

Daily reported on their front page on Monday. Corporate deleveraging needs a

benign environment considering firms in debt rely heavily on funding and

relevant guarantees, the report argued. Negative market expectations could

trigger panic in market players and heighten volatility, the report warned.

Comments: Corporate deleveraging is more complicated than financial deleveraging

because their long-term debts heavily depend on external support and funding.

The authorities need to guide market expectations properly, and conduct

deleveraging at a stable pace.

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

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

[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]