MNI China Daily Summary: Friday, January 18

     TOP NEWS: The government must focus on expending consumption and local

governments should increase policies boosting the use of electric cars and home

appliance, the National Development and Reform Commission and the Ministry of

Commerce said today. The government should also encourage rural consumption by

increasing access to high-quality industrial products in the countryside, they

said.

     DATA: Banks sold net CNY56.0 billion worth of FX on behalf of its clients

in December, down from CNY139.4 billion in November, indicating capital outflow

from China may have slowed. Banks' net purchases of FX forward contracts totaled

CNY66.3 billion, compared with CNY31.9 billion in November. The net purchases

position suggested market participants were betting on a stronger yuan in the

longer term. In 2018, banks sold net total CNY390 billion of FX, including both

transactions with clients and banks' proprietary trading desks.

     DATA: China's gross domestic production grew by 6.8% in 2017 after the

final verification, compared with the initial calculation of 6.9% released

earlier, according to a statement on the website of the National Bureau of

Statistics(NBS) today. The total value of GDP in 2017 recorded CNY82.08

trillion, down CNY636.7 billion from the first calculation, the NBS said.

     LIQUIDITY: The People's Bank of China (PBOC) today injected CNY10 billion

via 7-day reverse repos, and CNY10 billion through 28-day reverse repos, adding

liquidity for a fifth consecutive day. The operations resulted in a net

injection of CNY20 billion as no reverse repos matured, according to Wind

Information. The PBOC has net injected a total CNY1.16 trillion this week,

hitting a two-year high.

     RATE: The 7-day weighted average interbank repo rate for depository

institutions (DR007) increased to 2.5472% from Thursday's close of 2.5355%, Wind

Information showed. The overnight repo average decreased to 2.1630% from

Thursday's 2.2492%.

     YUAN: The yuan appreciated against the dollar, as USDCNY edged to 6.7706

against Thursday's close of 6.7747. The PBOC set the yuan's central parity rate

against the dollar weaker at 6.7665, compared with 6.7592 on Thursday. 

     BONDS: The yield on the benchmark 10-year China Government Bond was last at

3.1150%, up from the close of 3.0875% on Thursday, according to Wind

Information.

     STOCKS: The benchmark Shanghai Composite Index closed 1.42% higher at

2,596.01. Hong Kong's Hang Seng Index rose 1.25% to 27,090.81.

     FROM THE PRESS: China's key state-owned enterprises(SOEs) saw record high

total profits of CNY1.7 trillion in 2018, an increase of 16.7% y/y. Net profits

recorded CNY1.2 trillion yuan, a rise of 15.7%y/y, Securities Daily reports

today, citing Peng Huagang, spokesman of the State-owned Assets Supervision and

Administration Commission(SASAC). SASAC will accelerate setting up corporate

entities to manage state-owned capital and actively promote reform of mixed

ownership and equity diversification, the daily said citing Peng.

     The PBOC's week-long liquidity injection underlined its determination to

lead market interest rate lower, aiming to stabilize funding costs during the

tax season, Securities Daily said in a front-page commentary. The effect of the

PBOC's injection depends on whether banks can help to direct the funds towards

the real economy, the Daily said.

     China's increasing deflationary pressure will curb the overall import

demand for bulk commodities and the prices of overseas iron ore (especially

high-grade ore), thermal coal, coking coal and zinc will face different degrees

of adjustment, according to a report published by China International Capital

Corp. (CICC). The weakening domestic demand is inevitable due to a sharp

slowdown in credit expansion, the investment bank said.

--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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