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(M1) Trading Closer To The Week's Highs

     TOP NEWS: China's Ministry of Finance said on Friday it will cut tariffs on
US-made cars to 15% for three months, effective Jan 1, 2019. The move means the
country will undo the additional 25% import duty China imposed on U.S. cars in
July as trade war escalated. The move is to implement the important consensus
made by the two leaders at the G20 summit, the ministry said on its website.
     INSIGHT: China's leadership is likely to use a crucial meeting next week to
endorse proposals to defuse the trade dispute with the U.S., including moves to
boost imports, open up financial services, enhance intellectual property
protection and improve coordination on global trade rules, MNI understands from
speaking to officials and government advisors. While the measures, which have
been under discussion for some time, will not receive final approval at the
Central Economic Work Conference and key details will likely remain ambiguous,
officials hope confirmation that they are on the way to being enacted will help
ensure that a 90-day truce reached at a G20 dinner between Xi and U.S. President
Donald Trump leads to a more permanent ceasefire - something that would be key
to stabilizing growth in 2019 -- sources told MNI.
     POLICY: China needs loose monetary conditions to revive its slowing
economy, though the extent of the loosening may be limited by factors including
the need to protect the currency, Yi Gang, governor of the People's Bank of
China (PBOC), said at a forum in Beijing on Thursday. China's current account
surplus this year may only be 0.1-0.2% of the GDP, Yi said. It needs to increase
the flexibility of the yuan to deal with internal and external risks confronting
the economy, Yi said. Shadow banking, unusual volatilities of the market,
external impact and credit risks of key industries are considered "major risks,"
Yi said.
     DATA: Retail sales growth fell to a record low 8.1% y/y in November, down
from the 8.6% reported in October, below the median of 9.0% forecast in an MNI
survey. Industrial production growth slipped to 5.4% y/y, hitting a 10-year low.
FAI grew 5.9% in Jan-Nov, higher than the 5.8% median in an MNI survey, and was
the fourth month of expansion, according to official data released on Friday.
     LIQUIDITY: The PBOC skipped open market operations (OMOs) for a 36th
straight trading day, although the central bank injected CNY286 billion via
medium-term lending facilities (MLFs) to offset the maturing MLFs, leaving
liquidity unchanged. No reverse repos are maturing, according to Wind
Information.
     RATE: The 7-day weighted average interbank repo rate for depository
institutions (DR007) increased to 2.6922% from Thursday's close of 2.5959%, Wind
Information showed. The overnight repo average increased to 2.6482% from
Thursday's 2.5140%.
     YUAN: The yuan depreciated against the dollar, as USDCNY decreased to
6.8975 against Thursday's close of 6.8690. The PBOC set the dollar/yuan central
parity rate at 6.8750 today, lower than Thursday's 6.8769.
     BONDS: The yield on the benchmark 10-year China Government Bond was last at
3.3650%, flat from the close of Thursday, according to Wind Information.
     STOCKS: The benchmark Shanghai Composite Index closed 1.53% lower at
2,593.74. Hong Kong's Hang Seng Index decreased 1.62% to 26,094.79.
     FROM THE PRESS: China and the U.S. have reached consensus in the area of
agricultural products, energy and automobiles during trade consultation and more
details will follow, Xinhua News Agency reported Thursday night citing Gao Feng,
a spokesman at the Ministry of Commerce. At present, the two sides remain in
close communication over the details of the consultation and it is progressing
smoothly. China would welcome US negotiators to China and Chinese negotiators
are open to visiting the US, the report cited Gao.
     Defaults in the bond market are becoming the normality, as both the number
and value of defaults have more than doubled since last year, the 21st Century
Business Herald reported today citing data from Wind Information. So far this
year, there have been 126 bonds defaults, totaling CNY116.5 billion, both record
highs. There were only 43 defaults valued at CNY38.5 billion last year, the
newspaper said. The rush of bond defaults was triggered largely by corporate
operating difficulties amid the slowing economy. As many companies are in the
habit of using short-term financing to fulfil long-term capital needs, they are
likely to face liquidity issues when they can't roll over debt, the newspaper
said, citing Tao Dong, chief economist at Credit Suisse's Asia region.
     In an op/ed published online in Canada's Globe and Mail, China's ambassador
to Ottawa said the detention of Huawei's CFO isn't purely a legal matter, but a
political witch hunt of a Chinese tech firm by the US government. In his op-ed,
Lu said that many western countries still have a cold-war mentality, as they
believe China as a socialist country isn't normal, and worry that China will
surpass them too quickly in economic development and science and technology.
--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com
--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com
[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]