MNI China Daily Summary: Friday, August 16

     POLICY: China is expected to roll out new policies to boost personal

incomes in a bid to boost consumption, Meng Wei, the spokeswoman of the National

Development and Reform Commission said at a briefing on Friday. This would

include the promotion of reforms in the rural area and the broadening of

property income channels. China would also closely monitor changes and stabilise

prices of everyday items, said Meng, as current inflation was being driven by

higher food prices. 

     LIQUIDITY: The People's Bank of China (PBOC) injected CNY80 billion via

7-day reverse repos, resulting in a net injection of CNY80 billion as no reverse

repos matured, according to Wind Information. This aims to offset the tax

season, and keep the liquidity in the banking system reasonable and ample, the

PBOC said. The PBOC has net injected a total of CNY300 billion reverse repos

this week.

     RATES: The 7-day weighted average interbank repo rate for depository

institutions (DR007) fell to 2.6731% from Thursday's close of 2.6816%, Wind

Information showed. The overnight repo average increased to 2.6618% from

Thursday's 2.6605%. 

     YUAN: The yuan weakened to 7.0446 against the dollar from Thursday's close

of 7.0300. The PBOC set the dollar-yuan central parity rate lower at 7.0312,

compared with 7.0268 set on Thursday.

     BONDS: The yield on 10-year China Government Bonds was last at 3.0200%, up

from the close of 3.0100% on Thursday, according to Wind Information. 

     STOCKS: The Shanghai Composite Index increased 0.28% to 2,823.82. Hong

Kong's Hang Seng Index rose 0.94% to 25,734.22. 

     FROM THE PRESS: China will respond to provocations and definitely take

countermeasures if the U.S. rolls out new tariffs on the remaining Chinese

imports, People's Daily said in a commentary. The U.S. action in backing off

from the September 1 deadline to hike tariffs showed that the country was unable

to handle the impact of more taxes on Chinese imports, the newspaper said. China

will never give in on major issues of principle, no matter how much the U.S.

exerted "extreme pressures" on China, the newspaper said. 

     China is likely to focus more on promoting supply-side reform rather than

rolling out more fiscal policies such as more cuts to taxes and fees, according

to an article published in the PBOC-operated Financial News. Guan Tao, a former

official at the State Administration of Foreign Exchange, wrote that if external

shocks were greater than expected, China would be more passive in adjusting

macro policies given to a longer policy lag. 

     The first yield curve inversion between 10-year and 2-year U.S. Treasury

bonds since 2007 does not signal a recession, but indicates the market is

expecting a further loosening in monetary policy, China Securities Journal

reported citing analysts. As this scenario plays out, foreign investors are keen

to invest in the Chinese stock market in the long run as they are encouraged by

the Chinese government's economic growth policies, the newspaper said. 

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

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

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