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

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