MNI China Daily Summary: Friday, March 9

     TOPS NEWS: The People's Bank of China will play a bigger role in China's

future financial regulatory structure, Governor Zhou Xiaochuan said Friday.

China can be "bolder" in opening its financial markets to foreign investors,

Zhou said, adding the central bank may seek more connections with global capital

markets. China has sufficient policies to advance yuan's internationalization,

and needs to see how the policies take effect, Zhou said. China will continue to

enlarge the global acceptance of its currency, he said.

     TOP NEWS: China is "resolutely against" the U.S. move to impose 25% and 10%

tariffs respectively on imported steel and aluminum, the Ministry of Commerce

said. The U.S. protectionist action recklessly damaged the global multilateral

trade system and can cause "serious shock" to normal trade order, it said. China

will take "effective measures" to defend its legal interests, it said. China

urges the U.S. to withdraw its measures and respect multilateral trade system,

the ministry said.

     TOP NEWS: China is creating new regulations to control debt ratios of

state-owned companies, a segment that is critical to its campaign reining in

debt growth, according to Yang Weimin, deputy director of the Office of the

Central Leading Group on Financial and Economic Affairs on Thursday. Some of the

medium-sized Chinese cities, especially the so-called tier-3 and tier-4 ones

surrounding large cities with fast economic growth, are experiencing housing

bubbles, so property controls need to be kept tight there to prevent

over-heating that may endanger the economy, Yang told reporters on the sideline

of a press conference during the ongoing National People's Congress.

     DATA: New yuan-denominated loans increased by CNY839.3 billion in February

from January, according to data released by the PBOC on Friday. It was below the

median of a MNI survey of CNY900 billion. Total social financing (TSF) grew by

CNY1.17 trillion in February from January, higher than the median of the MNI

survey, which projected CNY1.0 trillion. M2 grew 8.8% y/y in February, lower

than the 11.1% growth in same month last year. 

     DATA: CPI grew 1.2% m/m in February, faster than the 0.6% in January. It

was the quickest rate in two years. M/m CPI acceleration was partly due to

higher food prices amid the Chinese New Year and cold weather which limited

supply and snagged transportation. CPI growth surged to 2.9% y/y in February,

much higher than the 2.5% median of a survey by MNI.

     DATA: PPI rose 3.7% y/y in February, in line with the projection of a MNI

survey. Slower from January by 0.6 percentage point, it was the lowest since

November 2016. PPI m/m was down 0.1% from the 0.3% growth in January, the first

time in eight months.

     ANALYSIS: China's lower growth of new loans in February does not suggest

funding demands have weakened, but partly reflects the effect of Chinese New

Year Holiday. Lower loan issuance last month was also caused by a sharp drop in

lending to non-bank financial institutions, which fell CNY179.5 billion, diving

from the CNY132.7 billion increase seen last February. 

     LIQUIDITY: PBOC skipped Open Market Operation (OMO) on Friday, saying on

its website that the current liquidity level is "relatively high," which is able

to absorb the impact of maturing reverse repo. The same wording was used

yesterday when OMO was also skipped. Today's inaction resulted in a net drain of

CNY40 billion due to the expiry of same amount of reverse repo. PBOC has drained

total CNY240 billion via OMO this week. CFETS-ICAP's money-market sentiment

index closed at 41 on Thursday, up from 34 on Wednesday.

     MONEY MARKET RATES: 7-day repo average was last at 2.7536%, unchanged from

Thursday, after PBOC drained CNY40 billion via its open-market operations. The

overnight repo average rose to 2.5612% from Thursday's 2.5433%.

     RATES: The Ministry of Finance sold CNY10 billion and CNY10 billion

three-month and six-month treasury bills carrying 3.0656% and 3.1206% respective

yields in auction on Friday. The rates were much lower than the 3.2042% and

3.2475% for bonds with the same maturity sold in the secondary market Thursday.

     YUAN: The yuan fell against the U.S. dollar after PBOC set a weaker daily

fixing. The yuan fell 0.05% to 6.3411 against the U.S. unit, compared with the

official closing price of 6.3321 yesterday. PBOC set the central parity rate at

6.3451. That is weaker than Thursday's 6.3239. The central bank has set the

parity weaker for two trading days out of five this week.

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

3.8400%, up from the previous close of 3.8295%, according to Wind Information.

     STOCKS: Shares rose in Shanghai, led by natural gas distribution companies

on officials' signaling more use of natural gas, with Henan Ancai Hi-tech Co. up

by the daily-limit 10%. The benchmark Shanghai Composite Index closed 0.57%

higher at 3,307.17. Hong Kong's Hang Seng Index gained 0.92% to 30,935.96.

     FROM THE PRESS: China Banking Regulatory Commission has conducted

monitoring and analysis on possible impacts on commercial banks of the new

wealth management product (WMP) regulation that is being drafted, China

Securities Journal reported citing Chairman Guo Shuqing. The regulation is

subject to further revisions, Guo said, according to Journal. Separately, on

property market, CBRC continues to monitor risks and contain bubble, Journal

cited Guo as saying. Stress tests on property loans show risks are controllable,

Guo was quoted as saying by the Journal.

     China's State-owned Assets Supervision and Administration Commission

(SASAC) supports market-based debt-to-equity swaps by SOEs, Securities Daily

reported Friday citing Chairman Xiao Yaqing. Debt swaps will be a key task to be

advanced by SASAC this year, Daily cited Xiao as saying. The government may

introduce more innovative methods in dealing with debt swaps and mergers and

acquisitions of state-owned enterprises, the newspaper cited analysts as saying.

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

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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