China forex regulator aims to defuse risk of external shocks

Posted By TheNewsCommenter: From News.yahoo.com: “China forex regulator aims to defuse risk of external shocks”. Below is an excerpt from the article.

SHANGHAI (Reuters) - China must prevent and defuse the risk of external shocks this year while strengthening macro-prudential management and guiding market expectations, the country's foreign exchange regulator said on Friday.

The comments come as the U.S. Federal Reserve is widely expected to start hiking interest rates as early as March, while its Chinese counterpart has stepped up monetary easing to prop up a slowing economy, raising concerns about possible capital outflows due to the policy divergence.

China is better able to cope with external changes, and "this round of tightening by the Federal Reserve may have less spillover effect than the previous round," Wang Chunying, spokesperson of the State Administration of Foreign Exchange (SAFE), told a news conference on Friday.

On Wednesday, Chinese government bond yields fell across the curve after an official's comments heightened expectations that the country's benchmark lending rate will be cut as early as this week to shore up the cooling economy.

"In the face of this round of Fed tightening expectations, both cross-border loans or capital flows related to trade financing are relatively stable," Wang said.

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