MNI China Daily Summary: Friday, November 8

     BEIJING (MNI) - EXCLUSIVE: The People's Bank of China (PBOC) should expand

the range of collateral it accepts against its lending to include high-rated

corporate debt and a greater range of local government bonds, policy advisors

told MNI, arguing that such a move would boost demand for the securities and

ease financing conditions for regional administrations and companies. China's

highly-indebted local governments are facing difficulty rolling over their

liabilities, including implicit debts such as borrowing by off-balance sheet

financing vehicles, one advisor told MNI, asking to remain anonymous.

     EXCLUSIVE: China has little room for further cuts in taxes or fees next

year after about CNY2 trillion in reductions in 2019, government advisors told

MNI, calling instead for reforms to social regulations to help ease the movement

of migrant workers or further monetary policy easing to stimulate demand. "The

scale of tax and fee cuts has been quite large this year, and there has to be a

limit, as the government has to sustain and provide public goods," said Liu

Shijin, a member of PBOC's monetary policy committee.

     POLICY: Global multilateral economic frameworks are under challenges

including the distrust between China and the U.S., thus limiting coordinated

effort of central banks to handle possible economic crisis, Zhou Xiaochuan, a

former PBOC governor, told the 10th Caixin Summit today. "It's worrisome" that

the spirit and mechanisms for cooperation among countries are lacking, compared

to the periods following the 2008 financial crisis and the 2011-2012 European

sovereign debt crisis, said Zhou.

     DATA: China's Exports fell 0.9% y/y to $212.90 billion in October, an

improvement on last month's 3.2% y/y drop, marking the first bounce in recent

three months. Imports dropped for the sixth straight month by 6.4% y/y to

$170.12 billion, slower than the 8.5% y/y fall recorded in September. 

     LIQUIDITY: PBOC skipped open market operations for the third day, leaving

liquidity unchanged as no instrument matured, according to Wind Information. The

total liquidity in the banking system is relatively high, PBOC said.

     RATES: The seven-day weighted average interbank repo rate for depository

institutions (DR007) rose to 2.4651% from Thursday's close of 2.4557%, Wind

Information showed. The overnight repo average decreased to 1.8974% from

Thursday's 1.9025%.

     YUAN: The currency weakened to 6.9884 against the dollar from Thursday's

close of 6.9880. PBOC set the dollar-yuan central parity rate higher for a third

day at 6.9945, compared with Thursday's 7.0008.

     BONDS: The yield on 10-year China Government Bonds was last at 3.2650%,

down from the close of 3.2675% on Thursday, according to Wind Information.

     STOCKS: The Shanghai Composite Index edged down 0.49% to 2,964.18, dampened

by the weakness of agriculture, brokerage and banking stocks. Hong Kong's Hang

Seng Index lost 0.70% to 27,651.14.

     FROM THE PRESS: The amount of infrastructure-backed special-purpose bonds

may exceed CNY3 trillion next year, the Securities Daily reported citing Tao

Jin, a senior researcher at Suning Institute of Finance. Some of next year's

issuance will be moved into this year to boost growth, the newspaper cited Tao

as saying.

     China's small and medium-sized banks are likely to increase the issuance of

subordinated bonds, preferred stocks and perpetual bonds to replenish their

capital, the 21st Century Business Herald reported citing analysts.

Shareholders' capital injections and the introduction of external investors may

also help improve capital position of small banks facing tighter regulations on

non-performing loans and requirements to boost lending, the newspaper said.

     China's central government has increased fiscal support to some local

governments through transfer payments under next year's quota, the Economic

Daily reported. Included are CNY84.7 billion to ethnic regions, CNY18.43 billion

to border provinces and CNY15.07 billion to counties that have major

contributions to China's revolution. The front-loading of the transfer payments

aims to cover local government spending on the public service, the newspaper

said.

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

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

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