MNI China Daily Summary: Friday, October 12

     TOP NEWS: A Chinese customs official downplayed the impact from the

country's trade spat with the U.S. Friday, even as he predicted a slowdown in

exports. The ongoing trade friction has caused issues, but the direct and

indirect influences are "basically under control," the General Administration of

Customs spokesman and the director of its statistical analysis division Li

Kuiwen said. Chinese exports to the U.S. in September rose about 14% on year to

$46.69 billion, while imports from the U.S. fell 1.3% y/y to $12.56 billion,

customs data released today show. The trade surplus rose to $34.13 billion from

$31.05 billion in August.

     LIQUIDITY: The People's Bank of China (PBOC) skipped open market operations

(OMOs) for an eighth day Friday, leaving liquidity levels unchanged. No reverse

repos matured Friday, according to Wind Information. The central bank said the

level of liquidity in the banking system remains "relatively high". The 7-day

weighted average interbank repo average rate for depository institutions (DR007)

decreased to 2.5935% from Thursday's close of 2.5952%, Wind Information showed.

The overnight repo average increased to 2.4245% from Thursday's 2.3441%.

     YUAN: The yuan appreciated to 6.9152 against the U.S. dollar from

Thursday's close of 6.9268. The PBOC set the yuan central parity rate weaker for

a ninth straight trading day at 6.912 on Friday, compared with 6.9098 on

Thursday.

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

3.5825%, up from the closing price of 3.58% on Thursday, according to Wind

Information. 

     STOCKS: The benchmark Shanghai Composite Index closed 0.91% higher at

2606.91. Hong Kong's Hang Seng Index increased 2.04% to 25782.05, rallying after

the sharp falls seen Thursday.

     FROM THE PRESS: China's economy is currently operating smoothly, and the

growth target set at the beginning of this year can be achieved, said Yi Gang,

the governor of the People's Bank of China, Securities Daily reported. The macro

leverage ratio has stabilised, while the leverage ratio of state-owned

enterprises has continued to decline, said Yi during the 2018 Annual Meetings of

the International Monetary Fund and World Bank Group in Bali on Thursday. Local

government debt is controllable, the balance of payments is generally balanced,

and financial risks are generally controllable, Yi added, before concluding that

China's economic structure has been optimised and has entered a stage of

high-quality development. The central bank's monetary policies will serve the

domestic economy first, Yi stated.

     Local governments are looking extensively into the current debt situation,

working on solutions to tackle local debt risks, and must report their findings

to the Ministry of Finance by the end of this month, Economic Information Daily

reported, citing an anonymous insider. The inspection will focus on the total

amount, category, structure and region of local debts, as well as the use of

implicit debts, which refers to what the local government borrows out of the

debt limit, the Daily said. 

     The multilateral trade system is the most effective way to contain the

risks of the global financial system and must be upheld by all countries, said

Wang Yong, a professor at the PBOC's Zhengzhou Training College, in an opinion

piece published by Shanghai Securities Journal on Friday. The weakening of the

outlook for global economic growth is partly due to the sharp rise in trade

policy uncertainty over the past year, Wang said. Escalating trade tensions and

the resulting policy uncertainty may dampen commercial and financial market

sentiment, trigger financial market turmoil and slow investment and trade, Wang

said, citing an IMF report. The increase in trade barriers will undermine global

supply chains, hinder the spread of new technologies, and ultimately lead to a

decline in global productivity and welfare, Wang added.

--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

[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]