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MNI China Press Digest: Friday, Dec. 1

     BEIJING (MNI) - The following are highlights from the China press for
Friday, Dec. 1
     A market-oriented yuan exchange rate and capital outflows will be the new
normal as the People's Bank of China gradually withdraws from regular market
intervention, 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 China Finance 40Forum think tank, wrote on the think tank's website late
Thursday. China will eventually achieve an international payments balance
between its trade surplus and its capital outflows, Guan predicted. The yuan's
appreciation this year was determined by where the PBOC set its daily parity,
not by the market supply and demand situation, Guan said. The measures
controlling cross-border capital flows are temporary and the stability of the
yuan exchange rate is also temporary, so market participants should prepare for
more volatility of the exchange rate and improve their risk management capacity,
Guan warned.
     The expansion of listed Chinese commercial banks has slowed so far this
year but profits continue to grow due to the robust economy, stable monetary
policy with a tightening bias, and stricter regulation, the Financial News, a
journal run by the People's Bank of China, reported Friday, citing the latest
note from the Bank of China. Net profits of listed banks are expected to
increase 4.3% and the non-performing loan ratio will stand at around 1.6% in
2017, the report said. The rising profits of industrial companies have reduced
the default risk of their loans. Asset qualify will improve in 2018 as credit
risks are reduced further, the report argued. The BOC predicted GDP would rise
6.7% in 2018, the newspaper noted. (Financial News)
     There will be no liquidity crunch during the cross-over from 2017 to 2018,
as fiscal spending is expected to increase in December and the People Bank of
China is fully prepared to meet liquidity needs via its newly-created 63-day
reverse repo, the China Securities Journal reported Friday. But liquidity
volatility is inevitable considering cash demand by companies and households is
increasing, the quarterly Macro-Prudential Assessment is approaching, large
volume of negotiable certificates of deposit will mature this month and capital
outflows will rise, particularly after the Federal Reserve hikes the fed funds
rate and further shrinks its balance sheet, the report warned. The PBOC will
take measures to ensure the stability of liquidity in the interbank market, the
report noted. (China Securities Journal)
     New Chinese government policies to encourage foreign investment are likely
to be launched in the near future and at an intensive pace, the Economic
Information Daily reported Friday. China will gradually lift restrictions on
corporate share holdings by foreign investors in a number of sectors including
securities, funds, futures as well as insurance, the report said. The opening up
of the service sector will be accelerated and foreign investment in education,
medicine and culture will also be welcomed, the report noted. (Economic
Information Daily)
--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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