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MNI China Press Digest: Monday, Dec. 18

     BEIJING (MNI) - The following are highlights from the China press for
Monday, Dec. 18:
     Though the U.S. Federal Reserve raised its benchmark interest rate a
quarter-point to 1.5% last week, China's monetary policy will not blindly follow
the step, the official People's Daily said Saturday. The expectation for an
interest-rate hike by central banks in some countries, including Canada, Britain
and South Korea, has been priced in by the market, so the impact of the American
move is weakening, according to analysts. China will stick to its independent
and steady style of monetary policy adjustment, the newspaper said. The manager
of the open market operations office at the People's Bank of China said the
recent decision to raise interest rates slightly was based on market demand. It
was a normal reaction to the Fed hike, the manager added, and could help control
the leverage ratio of the macro-economy. Analysts said the capital market and
the real economy relied unreasonably on monetary policy makers. China will
continue to stick to risk controls and let the financial market better serve the
real economy, the newspaper said. (People's Daily)
     A combination of risk controls and making the process more convenient is
necessary for the healthy development of Chinese companies' outbound investment,
the official People's Daily said Monday. China has been clamping down on
unreasonable outbound investment since earlier this year to prevent financial
risks to the domestic market and the inefficient use of capital. The major goal
is to examine whether outbound investment endangers national security and
interests, said Zhang Huanteng, head of the foreign capital and overseas
investment department at the National Development and Reform Commission.
Investments in foreign property, hotels, cinemas, entertainment and sports clubs
form a "restricted development" category that is closely examined. Other
categories face less regulation to ease outbound investment. New policies on
outbound investment have delayed companies' capital allocation for overseas
projects, the newspaper said, citing unidentified people. Zhang said a law
should be created to both regulate outbound investment and ensure investors'
interests, rather than the current situation, where regulators issue specific
departmental rules. (People's Daily)
     President Trump of the United States is set to "accuse China of 'economic
aggression'" in his national security strategy announcement scheduled for
Monday, the Financial Times reported, as Trump becomes increasingly "frustrated
at his inability to use his bond with China's President Xi Jinping to convince
Beijing to address his trade concerns."
     China's monetary policy will continue to be prudent and neutral although
the U.S. Federal Reserve raised its benchmark interest rate, the Economic
Information Daily, a newspaper under the official Xinhua News Agency, said in a
front-page commentary Monday. The Fed hike will theoretically strengthen the
dollar and lead to depreciation of the yuan, and also cause capital to flow to
the United States. But because the market has fully absorbed the expectations of
the hike, it will have limited impact on the domestic financial market. The
People's Bank of China raised rates slightly in open market operations, but the
central bank does not intend to follow the Fed in raising the benchmark interest
rate. The PBOC wants to guide market expectations and enforce deleveraging.
Though China's economy has been resilient, downward pressures should not be
ignored as the property sector increasingly cools down and investment growth may
slow further. Money market rates are still rising, and yields of 10-year
treasury bills exceed 4%. These conditions show that now may not be a good time
for China to raise its benchmark interest rate, the newspaper argued. (Economic
Information Daily)
--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com
--MNI Beijing Bureau; +86 (10) 8532-5998; email: rich.dirks@marketnews.com
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