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Free AccessMNI China Daily Summary: Friday, December 22
TOP NEWS: The moral hazard related to local government debt cannot be
stemmed, as China has no clear definition of local government bankruptcy, Xu
Zhong, head of the research department at the People's Bank of China, said at an
economic forum on Friday. The fiscal mismatch between local and central
governments has worsened the moral hazard related to the unlimited expansion of
central government debt, Xu noted. With no definition of "bankruptcy," the goal
of state-owned enterprise reform -- improving company governance -- will never
be achieved, Xu said.
POLICY: The National Development and Reform Commission, the nation's top
economic planner, said China will largely lift restrictions on foreign
investment in some key sectors including the financial sector, CCTV reported on
Friday. The report also said China will prioritize the improvement of its
production capacity structure in 2018, with the NDRC taking measures to
facilitate high-level investment and implementing the "negative list" for
investment, the report said. (CCTV)
RATES: Money market rates were lower on Friday after the PBOC drained a net
CNY80 billion from the banking system. The seven-day repo average was last at
2.7607%, down from Thursday's average of 2.8214%. The overnight repo average was
at 2.5691% compared with Thursday's 2.6103%.
LIQUIDITY: The People's Bank of China skipped open-market operations on
Friday, saying that liquidity conditions in the banking system were at a
"relatively high" level, given an increase in fiscal spending toward the
year-end that hedge the impact of maturing reverse repos and push up the banking
system liquidity level. This resulted in a net drain of CNY80 billion for the
day, as a total of CNY80 billion in reverse repos matured on Friday. The PBOC
injected a total of CNY200 billion into the banking system via its reverse repos
this week.
YUAN: The yuan strengthened against the U.S. dollar on Friday even though
the People's Bank of China set a weaker daily fixing. The yuan was last at
6.5752 against the U.S. unit, a rise of 0.16% compared with the official closing
price of 6.5858 on Thursday. The People's Bank of China set the yuan central
parity rate against the U.S. dollar at 6.5821 on Friday, weaker than Thursday's
6.5795. The PBOC set the fixing weaker two out of the five trading days this
week.
BONDS: The yield on benchmark 10-year China government bonds was last at
3.8700%, down from the previous close of 3.9176%, according to Wind, a financial
data provider.
STOCKS: Stocks were down, led lower by the agricultural sector. The
benchmark Shanghai Composite Index closed down 0.09% at 3,297.06. Hong Kong's
Hang Seng Index was 0.33% higher at 29,462.85.
FROM THE PRESS: China next year will mainly focus on proactive fiscal
policy, tight monetary policy and strengthened supervision, the Economic
Information Daily, a newspaper of the official Xinhua News Agency, reported
Friday. In a front-page analysis of this week's Central Economic Work
Conference, the newspaper said that the main theme of maintaining stability
while also advancing the economy was consistent with policies of the past five
years. However, China will change the pace and strength of macro-control, and
strengthen coordination between financial regulators, the report said. The
conference emphasized keeping a proactive fiscal policy, meaning that China's
fiscal deficit goal could be set at around 3%. The meeting released signals that
more bonds for special projects would be issued, mainly for environmental
protection and poverty reduction programs, which would support infrastructure
investment, the report said. The newspaper predicted that although monetary
policy changes in Europe and the United States could affect China's policy, the
country will not raise the benchmark interest rate because it is more concerned
with domestic factors. (Economic Information Daily)
The People's Bank of China will work to implement a prudent and neutral
monetary policy, and maintain reasonable growth of credit and social financing,
the Financial News, a newspaper of the central bank, reported Friday. The PBOC
will also help create a higher-quality economy for China, the central bank said
in a statement after a meeting Thursday led by Zhou Xiaochuan, the bank's
governor. The meeting was organized to analyze conclusions from the Central
Economic Work Conference, held earlier in the week. Subjects included risk
controls and forestalling systemic financial risks. The PBOC said it would
advance financial reforms and further open up the financial sector, while also
promoting green development. (Financial News)
Tight controls continue to weigh on the property sector, with hundreds of
failed land auctions in the last six months, the Securities Daily reported
Friday. According to data from Centaline Real Estate Research Center, auctions
of at least 261 parcels had failed so far in the second half of this year, with
111 in Tier-2 cities and 150 in the smaller Tier-3 and Tier-4 cities. The
failures were mainly because of a lack of bidders or because bidders' offered
prices were too low. The property market is cooling down and there are tight
controls on capital flowing into the sector, so property developers have become
less enthusiastic about acquiring land, analysts said. As the sector is expected
to cool further and developers' financing costs are expected to keep going up,
land auction failures will most likely also increase, especially in Tier-3 and
Tier-4 cities, where economic fundamentals are less favorable, the newspaper
argued. (Securities Daily)
--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com
--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com
[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.