MNI China Press Digest Mar 11: Policy Space, Forex, Yuan Band

The following lists highlights from Chinese press reports on Friday:

• The escalating conflicts between Russia and Ukraine and the resulting higher commodity prices may fan inflation and reduce the People's Bank of China's policy space, Zhang Ming, a senior fellow at the Chinese Academy of Social Sciences. With the adjustments in global capital markets, foreign funds may also exit China’s stock markets, increasing volatility, Zhang said in his personal WeChat blogpost. The higher global commodity prices are likely to force the Federal Reserve to quicken its policy tightening, slowing global growth further and causing more volatility, Zhang said.
• China may tighten controls over foreign exchange again if capital outflow increases following expected U.S. rate hikes, Beijing News reported citing Huang Yiping, a former monetary advisor at the People’s Bank of China and now a professor at Peking University. The expected rate hikes by the U.S. Federal Reserve may exert the same pressure on China as other emerging markets, including capital outflow, currency depreciation, rising rates and falling asset prices, Huang said. China still has policy space relative to other central banks grappling with inflation, including possible interest rate cuts, Huang was cited saying.
• China’s move to double the yuan trading band for the ruble helps to better absorb the fluctuation of ruble-U.S. dollar pair and prevent arbitraging, Yicai.com reported citing Guan Tao, chief economist of Bank of China International. The currency pair will be allowed to trade 10% around the fixing rate for the first time, as the ruble continued to plummet against the dollar. Sino-Russian trade companies are facing greater currency risks and a wider trading brand allows them to reduce exchange risks, the newspaper said citing Tu Yonghong, deputy director of the International Monetary Institute, RUC.