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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:
     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
     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
     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:
     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:
--MNI Beijing Bureau; +86 (10) 8532-5998; email:
--MNI London Bureau; +44208-865-3829; email:
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