MNI China Daily Summary: Friday, April 13

     TOP NEWS: China's economic growth will likely be resilient enough to

sustain the impact of the ongoing trade spat with the U.S., an advisor to

China's top planning body told MNI in an exclusive interview. "Under an extreme

situation it would drag a maximum 0.2% off China's GDP growth," Wang Haifeng,

director of the international trade and investment research office at the

Chinese Academy of Macroeconomic Research told MNI. China can't arbitrarily

reduce its trade surplus with the U.S., "even by USD1 billion," as its surplus

in trade is due to its structural strength in the global trade system, Wang

said. Even if China reduces its surplus under pressure from the U.S. in the

short run, it is very likely going to rebound in the long term, he said. 

     DATA: China exports shocked the market consensus by slumping 2.7% y/y,

compared with MNI's survey of 10.0% growth -- this marks the first decrease

since December 2016. On a monthly basis, exports fell 14.9%, compared with 14.4%

fall in February, after seasonal adjustments. Export growth for the first

quarter rose to 14.1% year-over-year to $174.12 billion. The trade balance

recorded its first deficit in 13 months at USD4.98 billion, much lower than

February's USD33.7 billon and MNI survey median of USD27.0 billion. Deficits

tend to be recorded in February or March every year due to Chinese New Year.

     LIQUIDITY: The PBOC skipped OMOs on Friday for the fourth consecutive

trading day, stating that current liquidity conditions were lower due to the tax

payments but still at a "relatively high" level. This resulted in unchanged

liquidity conditions as no reverse repos matured today. The PBOC has drained a

total of CNY100 billion via its open market operations this week. CFETS-ICAP's

money-market sentiment index closed at 42 on Thursday, slightly up from 38 on

Wednesday.

     MONEY MARKET RATES: The average 7-day repo rate rose to 2.6963%, from

Thursday's 2.6948%, after PBOC's skip of open-market operations resulted in no

change in liquidity. The overnight repo average dropped to 2.5445% from

Thursday's 2.5489%.

     RATES: The Ministry of Finance sold CNY10 and CNY10 billion respectively of

3-month and 6-month China Government Bonds at yields of 2.6067% and 2.9417% via

auction on Friday. The yield was lower than the 2.7197% and 3.0894% for bonds

with the same maturity trading in the secondary market Thursday.

     YUAN: The yuan fell against the U.S. dollar after the PBOC set a weaker

daily fixing. The yuan fell 0.11% to 6.2881 against the U.S. unit, compared with

the official closing price of 6.2814 yesterday. The PBOC set the yuan central

parity rate vs the U.S. dollar at 6.2898 on Friday, weaker than Thursday's

6.2834. The central bank has set the parity weaker for two trading days out of

five this week.

     BONDS: The yield on benchmark 10-year China Government Bond was last at

3.6995%, down from the previous close of 3.7075%, according to Wind Information.

     STOCKS: Shares declined in Shanghai, led lower by gasoline companies on

intensified conflicts in Middle East. The benchmark Shanghai Composite Index

closed down 0.66% at 3,159.05. Hong Kong's Hang Seng Index gained 0.03% to

30,839.52.

     FROM THE PRESS: Experts are divided in terms of the yuan's outlook amid the

trade spat between China and the U.S., China Securities Journal reported. The

yuan started to rise since the second half of March, which was driven by the

drop of the dollar generally, the report said. Trade tensions also weighing on

the market sentiment in the short run. 

     China's decision to further open its banking sector to foreign banks will

not cause a huge shock to domestic banks, China Securities Journal reported.

China's banking sector is already strong enough to counter possible risks.

Chinese banks developed much faster than foreign banks domestically, so it will

not make Chinese banks significantly less competitive.

     China will issue a series of policies and measures to develop its

manufacturing sector, and to create regional industrial clusters, Economic

Information Daily reported, citing unspecified authorities. Within this year,

China will improve and upgrade its Made In China 2025 plan, and will tailor the

guidance to individual cities and provinces, the newspaper said. A guidance on

creating industrial clusters where companies geographically gather in the

Yangtze River Economic Belt will be issued, it said. It's said regional

industrial cluster is a new trend for China's economic development, which will

help the country achieve high-quality economic growth.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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