MNI China Daily Summary: Friday, March 2

     TOP NEWS: China is "gravely concerned" about the "reckless" U.S. criticism

of its economic system and trade policies, according to a statement posted

Thursday night on the website of the Ministry of Foreign Affairs, citing an

unidentified official in charge of the Department of American and Oceanian

Affairs. U.S. Trade Representative Robert Lighthizer accused China of damaging

global market-based competition in his office's 2017 report released on Feb. 28.

China stressed cooperation and urged the U.S. to resolve differences

constructively while avoiding unilateral action, the official said.

     LIQUIDITY: The PBOC said on its website Friday morning that it injected

CNY40 billion 7-day, CNY30 billion 28-day, and CNY20 billion 63-day reverse

repos, with rates unchanged at 2.50%, 2.80% and 2.95% respectively. The central

bank added no further detail. There was a net drain of CNY20 billion as CNY110

billion reverse repo matures today. The PBOC has injected a net of CNY120

billion this week. CFETS-ICAP's money-market sentiment index closed at 50 on

Thursday, down from 56 on Wednesday.

     RATES: Money market rates rose after PBOC drained a net of CNY20 billion

via its open-market operations. The 7-day repo average was last at 2.9114%, up

from Thursday's average of 2.8904%. The overnight repo average was at 2.7705%

compared with Thursday's 2.6906%.

     RATES: The Ministry of Finance sold CNY10 billion three-month treasury

bills at a yield of 3.1246% via auction on Friday. The yield was much lower than

the 3.2504% for bonds with the same maturity sold in the secondary market on

Thursday.

     YUAN: The yuan fell against the U.S. dollar despite the People's Bank of

China set a stronger daily fixing. The yuan was last at 6.3462 against the U.S.

unit, dropping 0.18% compared with the official closing price of 6.3430

yesterday. The PBOC set the yuan central parity rate vs the U.S. dollar at

6.3334 today, stronger than Thursday's 6.3352. PBOC has set the fixing stronger

for three trading days out of five this week. 

     BONDS: The yield on benchmark 10-year China government bonds was last at

3.8500%, up from the previous close of 3.8300%, according to Wind.

     STOCKS: Stocks declined in Shanghai, led lower by coal gas companies

shares, with Foshan Gas Group Co. down more than 3%. The benchmark Shanghai

Composite Index closed down 0.59% at 3,254.53. Hong Kong's Hang Seng Index was

down 1.55% at 30,564.54.

     FROM THE PRESS: Wealth management products, off-balance sheet deals and

shadow banks will be "priority of the priority" for China's financial

regulations this year, China Securities Journal said in a report citing official

and industry sources. Banking regulators emphasized illicit activities would

receive severe punishment, Journal said citing an official. Banking and other

security regulators will together scrutinize cross-market products under the

direction of the State Council Financial Stability and Development Committee,

Journal said citing the official.

     China should continue to control financial risks and push for deleveraging,

which will be a key agenda at the National People's Congress next week,

Financial News reported. Major risks in China's economy include high leverage

ratios, liquidity risks, bad loans, shadow banking, hidden local government debt

and property bubble, the newspaper said. The property market and financial

sector need to be reformed to a more sustainable cycle. Regulators should curb

excessive speculation, prevent rapid growth of leverage ratio in the household

segment and rein in illegal financing for home purchasers and developers, the

newspaper said.

     Growth in China's wealth management sector is expected to slow after it

gets introduced sometimes this year, Economic Information Daily reported.

Regulations are expected to remain tight in areas such as clamping down on

financial institutions' activities, maintaining certain rates of return on

investment or principle, and removing complicated dealings, Daily said, citing

industry insiders.

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

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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