MNI China Daily Summary: Friday, November 10

     TOP NEWS: China has agreed to allow greater foreign ownership in financial

entities as part of the trade deal reached during U.S. President Donald Trump's

visit to Beijing. Overseas investors can now boost their shareholdings up to

51%, from the previous 49% cap, in securities businesses, investment funds and

futures brokerages, Vice Finance Minister Zhu Guangyao said at a press

conference on Friday. The limits will be scrapped altogether after three years,

he said. Regulators are also removing curbs on foreign investment in Chinese

banks and asset management companies, so they will be subject to the same

shareholding limits as domestic entities, Zhu said. Restrictions on investments

in insurance companies will also be eased, then removed, in five years, he said.

China will also gradually cut tariffs on imported vehicles, starting with

"special-purpose" vehicles -- a category that includes vans, trucks and

commercial vehicles -- as well as on new-energy vehicles, Zhu said.

     TOP NEWS: The newly launched Financial Stability and Development Committee

under the State Council will be a major force in deciding the priorities for new

financial regulation policies while the individual financial regulators who are

represented on the committee -- the People's Bank of China, the China Banking

Regulatory Commission, the China Securities Regulatory Commission, and the China

Insurance Regulatory Commission -- will implement the policies, the Financial

News, a newspaper managed by the PBOC, reported Friday. Given the PBOC is also

conducting some of the same functions as the committee, their respective tasks

and functions need to be further clarified and boundaries set, the newspaper

said. It cited analysts predicting that the first major task for the committee

will be to strengthen regulation of financial holding companies, which offer

services in more than one regulatory area. Many of these companies arbitrage

regulation to reduce supervision and so create bigger financial risks in the

process. PBOC head Zhou Xiaochuan has stressed the need to clamp down on such

companies, the report noted. (Financial News)

     POLICY: China's corporate and local government debt swap push has had only

a limited impact on reducing corporate debt burdens so far, with the plan facing

several obstacles to success given the low rate at which currently contracted

swap agreements are being carried out and because the level of enthusiasm shown

for the program by banks and companies has waned.

     RATES: Money market rates were higher on Friday after the PBOC injected a

net CNY50 billion via open-market operations. The seven-day repo average was

last at 2.9342%, up from Thursday's average of 2.9026%. The overnight repo

average was at 2.7399% compared with Thursday's 2.6630%.

     RATES: The People's Bank of China injected CNY40 billion in seven-day

reverse repos, CNY20 billion in 14-day reverse repos and CNY20 billion in 63-day

reverse repos via open-market operations Friday. This resulted in a net

injection of CNY50 billion on the day, as a total of CNY30 billion in reverse

repos matured on Friday. It was the first day this month the PBOC made a net

injection via open-market operations. The PBOC drained a total of CNY230 billion

in liquidity via open-market operations this week. The CFETS-ICAP money-market

sentiment index ended at 49 on Thursday, slightly up from 47 at Wednesday's

close. The lower the reading, the better the liquidity conditions in the

interbank market.

     YUAN: The yuan rose against the U.S. dollar Friday after the People's Bank

of China set a stronger daily fixing. The yuan was last at 6.6373 against the

U.S. unit, rising 0.05% compared with the official closing price of 6.6391 on

Thursday. The People's Bank of China set the yuan central parity rate against

the U.S. dollar at 6.6282 Friday, stronger than Thursday's 6.6325. The PBOC set

the fixing stronger in two of the five trading days this week.

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

3.8950%, down from the previous close of 3.9000%, according to Wind, a financial

data provider.

     STOCKS: Stocks rose, led higher by the wine-making and coal sectors. The

benchmark Shanghai Composite Index closed up 0.15% at 3,432.67. Hong Kong's Hang

Seng Index was 0.11% higher at 29,168.08.

     FROM THE PRESS: The yuan is expected to fluctuate in a small range in the

near term even though the dollar could strengthen, the China Securities Journal

reported Friday. The short-term outlook will depend largely on the trend of the

dollar, and so the U.S. tax reform process will be a key factor affecting the

yuan, unidentified market experts were cited as saying. The two-way fluctuation

of both the dollar index and the yuan against the dollar will be more

pronounced, the experts told the newspaper. The report cited Guotai Junan

Securities as saying that strong U.S. economic fundamentals, such as the high

October PMI and consumer confidence index, mean there is a greater chance that

U.S. tax reform will be approved, as well as the possibility that a Fed interest

rate hike in December could cause the dollar to strengthen, so the room for the

yuan to appreciate is not large. But the newspaper cited other analysts as

saying that China's strong economic growth and a positive outlook for its trade

would help stabilize the yuan. (China Securities Journal)

     China needs to work hard to achieve its goal of an "all-around opening up"

of the economy, Vice Premier Wang Yang wrote in an extensive article published

in the official People's Daily on Friday. How to switch from China's old growth

engines to a new growth model is the key to its economic development amid the

global economic recovery, Wang said. China needs to better integrate the opening

up of its manufacturing and service sectors, he said. The manufacturing sector

needs to open up further, except for some "sensitive fields," by reducing

restrictions on foreign ownership and the business scope of companies doing

business in China, Wang noted. Wang also stressed that China needs to innovate

its outbound investment methods. Some Chinese companies' outbound investments

are unreasonable and create potential risks, so China will strengthen guidance

on investments and overseas mergers and acquisitions, he said. (People's Daily)

     China is not purposely pursuing a large trade surplus with the United

States, Chinese Premier Li Keqiang stressed in his meeting with U.S. President

Donald Trump on Thursday, the official Xinhua News Agency reported Friday. China

and the U.S. need to further open up their markets to each other and create a

fair and competitive business environment, Li said, adding that China would

welcome the U.S. expanding its services trade and high-tech product exports to

China. Trump said during his visit to Beijing that he hopes the two countries

can strengthen cooperation and facilitate a fair and balanced economic and trade

relationship. (Xinhua News Agency)

     Cooperation is the only correct choice for China and the United States, and

a win-win approach could create a better future for the bilateral relationship,

Xinhua News Agency said in a late-night commentary Thursday. Room for

cooperation is large, with economic and trade cooperation the ballast of the

relationship, it said. On Wednesday, China and the U.S. signed mutual investment

agreements and contracts worth more than $250 billion, breaking a historical

record and reflecting the great potential for cooperation between the two

nations, it said. (Xinhua News Agency)

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

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

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