MNI China Daily Summary: Friday, November 9

     TOP NEWS: The People's Bank of China(PBOC) is tolerating a wider band for

yuan volatility, but may still defend a key psychological level, an official

researcher told MNI. "A new yuan exchange rate formation mechanism is emerging,

comprising market forces, a stable currency basket rate and a wide volatility

band," said Zhang Bin, a senior fellow of the China Finance 40 Forum, speaking

on the sidelines of its quarterly Macro Policy Report briefing. He dubbed the

new system "the FBB regime", according to the initials of "floating", "basket"

and "band". (For full story see: https://www.marketnews.com/node/1834445)

     TRADE WAR: Chinese President Xi Jinping said Beijing and Washington must

have an accurate idea of each other's strategic intentions, speaking during his

meeting with Henry Kissinger, former U.S. secretary of state, in Beijing on

Thursday, according to the official website of the Ministry of Foreign Affairs.

Xi said that China is willing to resolve problems with the U.S. through friendly

dialogue on the basis of equality and mutual benefit, but Washington must

respect China's right to choose its own development path and interests.

     DATA: China's consumer price inflation remained at 2.5% y/y in October, the

same level as in September and in line with the median 2.5% forecast in an MNI

survey. On a monthly basis, CPI gained 0.2%, slowing from September's 0.7%, as a

correction of food prices was balanced by gains in petroleum products.

Factory-gate inflation slowed for a fourth consecutive month, recording 3.3% y/y

in October, matching the 3.3% projected in an MNI survey but decelerating from

September's 3.6% to a backdrop of cooling manufacturing activity and sluggish

domestic demand. PPI gained 0.4% m/m, slowing from September's 0.6%, official

data released by the National Bureau of Statistics on Friday showed.

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

leaving liquidity unchanged. No reverse repos mature today, according to Wind

Information. The central bank said liquidity in the banking system is at a

reasonable and ample level.

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

institutions (DR007) decreased to 2.5532% from Thursday's close of 2.5581%, Wind

Information showed. The overnight repo average increased to 2.0345% from

Thursday's 1.9550%.

     YUAN: The yuan depreciated to 6.9481 against the U.S. dollar from

Thursday's close of 6.9285. The PBOC set the yuan central parity rate weaker at

6.9369 on Friday, compared with Thursday's 6.9163. The central bank has set the

fixing weaker for three days out of five this week.

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

3.48%, unchanged from the closing price on Thursday, according to Wind

Information.

     STOCKS: The benchmark Shanghai Composite Index closed 1.39% lower at

2,598.87. Hong Kong's Hang Seng Index decreased 2.39% to 25,601.92.

     FROM THE PRESS: Banks' lending to private enterprises should account for no

less than 50% of new corporate loans in three years, the Financial News

reported, citing Guo Shuqing, chairman of the China Banking and Insurance

Regulatory Commission. Policymakers are considering setting targets for banks.

For large banks, loans to private companies should account for no less than one

third of total corporate loans, and the ratio shall be no lower than two thirds

for small and medium-size banks, the newspaper said, citing Guo. Private

companies account for about 25% of total borrowing even as private economic

activities make up more than 60% of the economy, the newspaper cited Guo as

saying.

     China's real estate industry may not be entering a bear market even as an

increasing number of land auctions failed to attract buyers, according to a

commentary published Friday in Economic Daily, authored by the China Academy of

Macroeconomics under the National Development and Reform Commission. Stringent

housing regulations, increasing financing costs and the cooling market have made

developers refrain from acquiring land, the newspaper said. The housing market

is steady, judging by data including local government land revenues, commercial

housing sales and inventory data, the daily said. (Link to story:

https://bit.ly/2qzWnoa)

     China must create a good business environment for private and small

companies to boost growth, Xinhua News Agency reported on Thursday, citing

Premier Li Keqiang. Li pledged to further simplify approval processes, expand

market access, ensure fair competition with state-owned enterprises, and

encourage private companies to invest in infrastructure and base industries,

Xinhua said. (Link to story: https://bit.ly/2RGPeOk)

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

--MNI London Bureau; +44208-865-3829; email: Jason.Webb@marketnews.com

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