MNI China Daily Summary: Friday, November 16

     POLICY: The People's Bank of China (PBOC) has adopted a series of policies

to boost the real economy via credit supply and supporting tools for bonds and

equity financing. Commercial banks are required to make full use of the

resources to increase financial support for private and small companies and to

help sustain their commercial activities, Governor Yi Gang said Friday,

according to the PBOC website. Financing difficulties have eased somewhat, as

lending to private and small companies has increased at a faster pace this year.

However, it is also noticeably that some enterprises that have expanded at a

rapid manner early in their development still find it hard to obtain financing,

the PBOC said.

     LIQUIDITY: The PBOC skipped open market operations (OMOs) on Friday,

leaving liquidity unchanged on the previous day, with no reverse repos maturing,

according to Wind Information. The central bank said the total liquidity in the

banking system has declined due to the taxation period and other factors, but

was still at a reasonable and ample level.

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

institutions (DR007) increased to 2.6024% from Thursday's close of 2.5753%, Wind

Information showed. The overnight repo average increased to 2.3400% from

Thursday's 2.3361%.

     YUAN: The yuan depreciated against the dollar Friday, as USDCNY rose to

6.9482 against Thursday's close of 6.9359. The PBOC set the dollar/yuan central

parity rate weaker for a third day at 6.9377 on Friday, compared with Thursday's

6.9392.

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

3.3450%, down from the closing price of 3.3900% on Thursday, according to Wind

Information.

     STOCKS: The benchmark Shanghai Composite Index closed 0.41% higher at

2,679.11. Hong Kong's Hang Seng Index increased 0.31% to 26,183.53.

     FROM THE PRESS: The market is expecting a further reserve requirement ratio

cut by the end of this year and an interest rate cut for the year ahead, 21st

Century Business Herald said Friday, citing Shen Jianguang, chief economist at

JD Finance. The corporate financing rate is relatively high, and the downward

pressure on the economy will continue into next year. Thus, the central bank is

likely to guide the money market rate down, by adjusting the 7-day repo rate.

The Medium-term Lending Facility rate and Standing Lending Facility rate will

also be lowered, the newspaper said, citing Shen. (Link to the story:

https://bit.ly/2zWxJ5z)

     China's fiscal deficit is expected to return to 3% or more of GDP next

year, Securities Daily said Friday, citing Zhang Jun, chief economist at China

Fortune Securities. As the government looks to expand tax cuts and increase the

scale of local government bond issuance, it will look to increase fiscal

expenditure by increasing the fiscal deficit next year, the Daily said citing

Zhang. (Link to the story: https://bit.ly/2zb4Bro)

     Financial markets are optimistic the yuan will remain stable at its current

level against the U.S. dollar, rather than depreciating to test the 7 level, the

China Securities Journal said Friday. The dollar index may be unlikely to

continue pushing higher, which help to ease the external pressure on yuan, the

Journal said. Internally, with a series of policies to stabilize economic

growth, and the regulators' effort to strengthen macro-prudential management,

the yuan rate will remain basically stable at a reasonable and balanced level,

the Journal said. (Link to the story: https://bit.ly/2DEkgU4)

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

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

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