MNI China Daily Summary: Friday, January 4

     TOP NEWS: The People's Bank of China(PBOC) will lower banks' reserve

requirement ratios by one percentage point in January, releasing about CNY1.5

trillion of liquidity. The PBOC also said it will not renew Medium-term Lending

Facilities(MLF) which will mature in the first quarter, but will instead provide

Targeted Medium-term Lending Facilities and make targeted RRR cuts soon. These

moves will result in an overall net injection of about CNY800 billion of

long-term liquidity, the PBOC said in a statement on its website today.

     POLICY: Premier Li Keqiang urged strengthening of counter-cyclical

macroeconomic policies, further cuts to taxes and fees, and the use of tools

like general and targeted RRR cuts, so as to better support private and small

companies, according to a statement on the Chinese government's website today.

     POLICY: China will authorise higher local government borrowing to pay for

increased infrastructure spending including a major railway expansion in 2019,

as officials seek to keep economic growth to at least 6.2% despite both a trade

dispute with the U.S. and slowing domestic demand, a senior government economist

told MNI in an interview. "Infrastructure investment will be the main buffer for

stabilizing the economy this year, as exports, consumption and property

investment will all soften," said Zhu Baoliang, director of the economic

forecast division at the State Information Centre, a think tank affiliated with

China's economic planning agency.

     TRADE WAR: U.S. Deputy Trade Representative Jeffrey Gerrish will lead a

working group to China on Jan 7-8, following an agreement by the two countries'

presidents in Argentina in December, according to a statement on the website of

the Ministry of Commerce.

     DATA: The Caixin services PMI rose to 53.9 in December, the highest in six

months, up from 53.8 in November, publisher Caixin said in a statement. The new

orders sub-index continued its moderate gain as both domestic and external

demand recovered. New export orders also rose to the highest level in six

months. Many companies surveyed said they put more efforts into earning export

orders in December. The official services PMI released on Monday declined to

52.3 from 52.4 in Nov.

     LIQUIDITY: The PBOC injected CNY10 billion in 7-day reverse repos today,

the 14th trading day of liquidity injection via open market operations. The

result was a net drain of CNY160 billion after the maturity of CNY170 billion of

reverse repos, according to Wind Information. Some CNY100 billion of Treasury

cash deposits at commercial banks matured today, said Wind.

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

institutions (DR007) increased to 2.3401% from Thursday's close of 2.2967%, Wind

Information showed. The overnight repo average decreased to 1.5889% from

Thursday's 1.8901%.

     YUAN: The yuan appreciated against the dollar, as USDCNY edged to 6.8645

against Thursday's close of 6.8721. The PBOC set the dollar-yuan central parity

rate stronger at 6.8586 on Friday, compared with 6.8631 on Thursday.

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

3.1650%, up from the close of 3.1550% on Thursday, according to Wind

Information.

     STOCKS: The benchmark Shanghai Composite Index closed 2.05% higher at

2,514.87. Hong Kong's Hang Seng Index rose 2.24% to 25,626.03.

     FROM THE PRESS: China's National Development and Reform Commission (NDRC)

has approved rail construction projects in eight cities worth CNY860 billion in

the last month, in line with the central government's plan to boost investment

and strengthen weak links in the economy, the Securities Daily said today. As

the country's infrastructure construction peak has passed, future investments

may focus on improving urban and inter-city rail and rural revitalization

projects, the Daily said, citing Zhang Yansheng, former director of Institute of

Foreign Economic Research under the NDRC.

     The PBOC is likely to make three or four RRR cuts this year, reported

Economic Information Daily today, citing Li Chao, chief analyst at Huatai

Securities. The PBOC is more likely to keep the benchmark deposit and lending

rate at current levels while guiding market rates down by lowering the

Medium-term Lending Facility and Open Market Operation rates, the Daily said,

citing Ding Anhua, chief economist at China Merchants Bank.

     China's population will reach a peak of 1.442 billion in 2029 before

beginning to decline, the Economic Daily said, citing a report by the Chinese

Academy of Social Sciences. If China's fertility rate remains at 1.6, growth may

turn negative as early as 2027, according to the report, which called on the

government to take immediate measures to deal with a falling and ageing

population.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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