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TOPS NEWS: China and Saudi Arabia will create a joint $20 billion fund to
invest in infrastructure, energy, mining and materials, the South China Morning
Post reported Friday, citing Saudi Energy Minister Khalid Al-Falih. Al-Falih
said the two countries plan to sign 11 deals worth about $20 billion this week.
Saudi Arabia is considering contributing some parts of the fund in yuan, said
Mohammed Al-Tuwaijri, the country's vice-minister of economy and planning. The
fund would come as Saudi Arabia is trying to regain its spot as the biggest oil
supplier to China, its biggest trading partner, after Russia took over the top
spot last year. Analysts said Saudi Arabia is eager to cooperate with China due
to China's surging economic influence and the U.S. soft power failure in some
countries. Both China and Saudi Arabia are also hoping to get more economic
influence in the world, according to the newspaper. (South China Morning Post)
TOP NEWS: The People's Bank of China skipped its open-market operations
Friday, according to a statement on its website. This resulted in a net drain of
CNY130 billion for the day, as a total of CNY130 billion in reverse repos
matured on Friday. The PBOC has drained a net CNY330 billion in liquidity via
its reverse repos this week, compared with the CNY110 billion net injection last
week. The central bank explained in a statement on its website that its inaction
was due to the fact that liquidity was at an appropriate level given the impact
of government fiscal expenditures, the treasury cash deposits it made to banks
on Thursday, bank withdrawals from central bank fund in excess of those required
to meet their reserve requirement ratios. The CFETS-ICAP money-market sentiment
index ended at 40 on Thursday, down from 51 at Wednesday's close. The lower the
reading, the better the liquidity conditions in the interbank market.
POLICY: Yi Huiman, the chairman of Industrial and Commercial Bank of China
(ICBC), said Thursday at a forum in Beijing that China needs to establish a
"super balance sheet" to manage its financial sector problems. As financial
markets develop, Yi said, traditional indicators like M2 money supply and
deposit-to-loan ratios cannot effectively reflect the real financial situation
and structure of a country, and the problem of different criteria being applied
when compiling financial data begins to stand out.
RATES: Money market rates were higher on Friday after the PBOC drained
CNY130 billion via its open-market operations. The seven-day repo average was
last at 2.9344%, up from Thursday's average of 2.9245%. The overnight repo
average was at 2.8655%, compared with Thursday's 2.8590%.
YUAN: The yuan fell against the U.S. dollar Friday after the People's Bank
of China set a weaker daily fixing. The yuan was last at 6.6654 against the U.S.
unit, dropping 0.08% compared with the official closing price of 6.6600 on
Thursday. The People's Bank of China set the yuan central parity rate against
the U.S. dollar at 6.6579 Friday, weaker than Thursday's 6.6525.
BONDS: The yield on benchmark 10-year China government bonds was last at
3.6046%, up from the previous close of 3.5969%, according to Wind, a financial
STOCKS: Stocks rose, led higher by the telecommunications, coal mining and
insurance sectors. The benchmark Shanghai Composite Index close 1.83% higher at
3,331.52, the highest close since January last year. Hong Kong's Hang Seng Index
was 1.16% higher at 27,839.08.
FROM THE PRESS: Most of the 59 property developers listed as A shares which
have already released their first half-year results stressed they would invest
in expanding China's rental housing market followed government prompting to
expand rental housing supply, the Shanghai Securities Journal said in a
front-page report on Friday. The development of the rental housing market and
active participation of listed property companies will further curtail the rise
of housing prices and help the property market to reach a balanced and healthy
development status, the newspaper quoted experts as saying. Currently, larger
property companies tend to have higher profit growth due to stronger sales, the
newspaper noted. "Larger sales scale means lower financing costs and higher
efficiency in land acquisition," the newspaper said. (Shanghai Securities
Ministry of Commerce spokesman Gao Feng said Thursday that one of the
ministry's next most important tasks will be improving checks on the
authenticity of outbound investments, the China Securities Journal reported on
Friday. The ministry will create a "negative list" of prohibited investment
sectors to guide Chinese companies' outbound investment and will conduct random
inspections of their overseas investments, the report said. (China Securities
China's financial risks are more complicated than ever, Yu Xuejun, chairman
of the supervisory board for key state-owned financial institutions under the
China Banking Regulatory Commission, said Thursday at the 2017 China Banking
Development Forum, the China Securities Journal reported Friday. Yu said China's
credit levels continue to surge, financial institutions' balance sheets are
expanding rapidly and their business structures are undergoing major changes,
the report said. Yu also noted that financial regulators are lagging behind
financial innovation and rapid changes in financial institutions, adding that it
is becoming more difficult to manage and regulate China's macro economy. (China
A report by the Chinese Academy of Social Sciences on the Chinese
government's balance sheet shows that China's total assets can fully cover its
total liabilities and still have room for flexibility, the Economic Information
Daily, a newspaper under Xinhua News Agency, said in a front-page report Friday.
From 2010 to 2015, the ratio of Chinese government's net assets to GDP was above
80% on average, with a fluctuation range of CNY40 trillion to CNY60 trillion,
the report said, citing the CASS report, which was released on Thursday. Chen
Hanwen, an accounting professor at the University of International Business and
Economics, said the data show China has the capability to manage financial risks
and refute speculation that China's economy is at risk of collapse. The CASS
report, however, cautioned about the risk of accumulated debt. (Economic
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