MNI China Daily Summary: Friday, January 17

     BEIJING (MNI) - EXCLUSIVE: The yuan should draw added strength from the

signing of the U.S.-China trade deal, which calls for the continued development

of financial markets, former Chinese officials and senior advisors told MNI

Thursday. The deal will help China increase the transparency of the yuan forex

formation mechanism, said Sheng Songchen, former director of the statistics and

analysis department at the People's Bank of China (PBOC), while a commitment to

allow asset managers to make purchases of Chinese non-performing loans should

bring in foreign expertise and capital as the country stabilises debt levels,

assisting the PBOC's risk prevention task.

     EXCLUSIVE: China should be able to meet targets under its phase one trade

deal over the next two years, market conditions allowing, government advisors

told MNI, but they cautioned that the agreement's dispute resolution mechanism

could contain the seeds of its collapse and that its longer-term targets for

growth in trade may be unrealistic.

     DATA: China's Q4 GDP expanded 6.0% y/y, with full-year growth registering

6.1%, the lowest level since 1990. It was at the low end of the 6-6.5% range

targeted by the government at the beginning of the year. 

     DATA: Industrial output expanded 6.9% y/y in Dec from 6.2% in Nov, the

highest in nine months and beating projected 5.8%. Retail sales rose 8% y/y,

flat from Nov and higher than 7.8% forecast. Fixed-asset Investment recorded

5.4% in full-year 2019, stronger than 5.2% in Jan-Nov and the 5.2% median

forecast.

     POLICY: China achieved its major economic goal for 2019, with stable growth

despite "obvious domestic and external challenges", though challenges remain,

said Ning Jizhe, the head of the National Bureau of Statistics on Friday. China

will keep the economy on track, ensuring a "reasonable range" of growth with

countercyclical measures, Ning said.

     LIQUIDITY: The PBOC injected a net of CNY200 billion via 14-day reverse

repos with the rate unchanged at 2.65%, according to a statement on PBOC

website. The injection aims to offset the peak demand for cash and payments for

government bonds, and keep the liquidity in the banking system at a reasonable

and ample level before Chinese New Year, PBOC said.

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

institutions (DR007) decreased to 2.6338% from Thursday's close of 2.6907%, Wind

Information showed. The overnight repo average fell to 2.5200% from Thursday's

2.6130%.

     YUAN: The currency strengthened to 6.8585 against the dollar from

Thursday's 6.8850 close. PBOC set the dollar-yuan central parity rate higher for

the first time in six trading days at 6.8878, compared with 6.8807 on Thursday.

     BONDS: The yield on 10-year China Government Bonds was last at 3.1100%,

down from Thursday's 3.1205, according to Wind Information.

     STOCKS: The Shanghai Composite Index edged up 0.05% to 3,075.50. Hong

Kong's Hang Seng Index gained 0.60% to 29,056.42.

     FROM THE PRESS: China is expected to lower the reserve requirement ratio by

50 bps in 2020, the Beijing Business Today reported citing Wen Bin, chief

analyst at China Minsheng Bank. China will keep the rate of medium-term lending

facility unchanged due to inflation pressures, while the market-oriented Loan

Prime Rate, used by banks to price loans, is expected to be cut by 5bps in

January, the newspaper said.

     Several eastern Chinese provinces set GDP growth targets "around 6%" for

2020, indicating that the national growth target should adopt the same wording,

the 21st Century Business Herald reported citing Sheng Laiyun, deputy head of

the National Bureau of Statistics. Research by various experts showed that

China's potential economic growth rate is around 6%, the newspaper added.

     The inclusion of Chinese government and local government bonds into

calculations of total social financing (TSF) can better support the coordination

of monetary and fiscal policies, the People's Daily reported citing Ruan

Jianhong, director of the Financial Survey and Statistics Department at PBOC.

Current liquidity in the banking system is reasonable and abundant, financial

data is generally better and structures are optimized, the daily cited Ruan as

saying.

--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

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