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     TOP NEWS: The Chinese government's historic push to reduce air pollution in
northern China this year is having an unexpected positive side effect: reducing
trade friction with trading partners who have long complained about the flood of
cheap Chinese steel exports into their own markets. In China, which accounts for
more than half of the world's output of steel, export margins for pipes,
reinforcement bars, cables and sheets have plunged, coupled with the lowest
domestic stockpiles in more than a year. Shipments in the first 11 months were
70 million tons, down 31% year-on-year, according to trade data released Friday.
The reduced export trend is likely to persist for some time, according to
commodities traders and analysts interviewed by MNI.
     TOP NEWS: China's General Administration of Customs released November trade
data on Friday: Exports rose 12.3% year-on-year in November in U.S. dollar
terms, double MNI's survey median forecast for a 6.0% y/y gain and well above
the growth rate of 6.9% in October. The export growth rate was the highest since
March 2017 when it stood at 15.6%. Imports rose 17.7% year-on-year in November
in U.S. dollar terms, also higher than the MNI survey median forecast for an
11.0% y/y gain and slightly above the 17.2% rise in October. Imports rose for
the 13th month in a row, with the growth rate accelerating in each of the four
month recent months. China posted a $40.21 billion trade surplus in November,
higher than the MNI survey median forecast for a $36.50 billion surplus and
above October's $38.19 billion surplus. 
     LIQUIDITY: The People's Bank of China skipped its open-market operations
Friday, saying liquidity in the banking system in general is at a proper level.
This resulted in a net drain of CNY10 billion for the day, as a total of CNY10
billion in reverse repos mature on Friday. The PBOC has drained a net CNY510
billion via OMOs this week as it skipped open market operations today and each
of the first three trading days of the week. The net drain is the highest weekly
drain in 10 months, compared with a net drain of CNY40 billion last week. On
Wednesday, the PBOC injected CNY188 billion in one-year Medium-term Lending
Facility (MLFs) loans at an unchanged interest rate of 3.2%. The operation did
not add or drain liquidity, as a total of CNY188 billion in MLF loans matured
Wednesday. An additional CNY187 billion in MLF loans will mature on Dec. 16. 
     DATA: China's foreign-exchange reserves increased for the 10th straight
month in November, due largely to a positive valuation effect caused by the weak
performance of the U.S dollar during the month. Foreign-exchange reserves
increased $10.06 billion during the month to $3.119 trillion, the biggest gain
since last October and significantly higher than the $703 million rise in
October, according to data from the People's Bank of China. "Major non-dollar
currencies appreciated, which resulted in changes of relevant assets prices,
which was the main reason for the increase" in reserves, the State
Administration of Foreign Exchange (SAFE) explained in a statement Thursday.
     DATA: Some 2.46 million passenger cars were sold in November, up 10% from
October and 3.6% higher than a year ago, the China Passenger Car Association
said in a report Friday. The stronger sales reflect relatively strong purchasing
power at the end of the year, the report said. New energy vehicle sales gained
8% on a monthly basis in November to 70,000, the 10th monthly rise this year.
The association said sales in December may not be strong as the same period last
year because the 2.5% tax discount for cars with small-engines available this
year is not as attractive as was the 5% discount available last year. The
association predicted sales for the whole year would rise 2% this year and 4%
next year.
     RATES: Money market rates edged up on Friday. The seven-day repo average
was last at 2.8099%, up from Thursday's average of 2.8051%. The overnight repo
average was at 2.5918% compared with Thursday's 2.5682%.
     RATES: The Ministry of Finance sold CNY15 billion in 91-day treasury bills
at a yield of 3.9684% in an auction on Friday. The yield was slightly higher
than the 3.9498% for bills with the same maturity in the secondary market on
Thursday.
     RATES: The Ministry of Finance sold CNY10 billion in 182-day treasury bills
at a yield of 3.9795% in an auction on Friday. The yield was higher than the
3.8321% for bills with the same maturity in the secondary market on Thursday.
     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 6.6166 against the U.S.
unit, dropping 0.02% compared with the official closing price of 6.6155 on
Thursday. The People's Bank of China set the yuan central parity rate against
the U.S. dollar at 6.6218 Friday, modestly weaker than Thursday's 6.6195. The
PBOC has set the fixing weaker for 10 consecutive trading days, with today's
fixing the weakest since Nov. 22.
     BONDS: The yield on benchmark 10-year China government bonds was last at
3.8988%, up from the previous close of 3.8800%, according to Wind, a financial
data provider.
     STOCKS: Stocks rose, led higher by the agriculture sector. The benchmark
Shanghai Composite Index closed up 0.55% at 3,289.99. Hong Kong's Hang Seng
Index was 1.29% higher at 28,669.33. 
     FROM THE PRESS: Chinese regulators are trying to guide financial
institutions into stable and sustainable business areas and away from their
previous models that overvalued growth, the Financial News, a newspaper managed
by the People's Bank of China, said Friday. Cao Yu, vice chairman of China
Banking Regulatory Commission (CBRC), said city commercial banks need to decide
what types of businesses they want to be in, reflecting regulator's push to
prevent potential financial risks and promote sustainable development models,
the newspaper said. The market and society are increasingly paying attention to
optimizing economic structures and enhancing asset quality. (Financial News)
     Financial trusts reported decent growth in their assets in the third
quarter, with property market financing exceeding 10% of assets for the first
time in three years, the 21th Century Business Herald reported Friday. Financial
trusts' assets reached CNY24.41 trillion at the end of the third quarter,
CNY1.27 trillion more than at the end of second quarter, a 5.47% quarterly
growth rate, according to a report released by China Trustee Association on
Thursday. In the first nine months of the year, financial trusts' investments in
the property sector grew 1% to CNY2.07 trillion, or 10.01% of their total
investments at the end of September, the newspaper said. The government campaign
to tighten funding channels for property developers has motivated property
companies to turn to financial trusts. The newspaper said property companies
issued only 38 bonds in the first half of this year, accounting for less than
0.5% of their total financing. Development of the rental housing market is
providing new opportunities for financial trusts, with their investments focused
on real estate investment trusts (REITS) and rental property asset
securitization. (21th Century Business Herald)
     Chinese money supply is expected to remain tightly balanced, but the market
should not be pessimistic about the liquidity outlook as the period of greatest
interest rate fluctuation has passed, China Securities Journal reported Friday.
The liquidity injection by the People's Bank of China (PBOC) on Wednesday via
its Medium-term Lending Facility (MLF) shows the central bank will provide
sufficient liquidity to ensure money supply does not experience large
fluctuations at the end of the year. There will be a clear imbalance of
liquidity supply and demand in mid-December, the newspaper said, citing
unidentified experts predicting the central bank would continue injections via
its MLF to stabilize the market. The supply of money entering the new year will
not be a problem even if the PBOC drains funds because fiscal expenditures will
increase in the second half of December. (China Securities Journal)
     Banks in Xiamen city in Fujian Province cancelled CNY105 million of
consumer loans and "operational loans" -- loans for operational equipment
updates or office renovation -- which were used illegally to fund home
purchases, Caixin reported Friday. Xiamen banks are now checking how their
clients use consumption loans under orders from the local banking regulator, the
magazine said. Zhang Xintan, chairman of the Xiamen Banking Regulatory
Commission, said the agency is requiring banks to build systems to clamp down on
credit illegally transferred to the property sector and has already punished
four banks that allowed consumer loans to be used for property financing. Some
Chinese banks have already started to ask consumer loan customers to provide
receipts to prove they did not use their loans for home purchases, but other
banks are helping clients find receipts to justify the loans. (Caixin)
--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com
--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com
[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]