MNI China Daily Summary: Friday, October 13

     TOP NEWS: China's General Administration of Customs released September

trade data on Friday: Exports rose 8.1% year-on-year in September in U.S. dollar

terms, lower than MNI's survey median forecast for a 9.6% y/y gain but above the

growth rate of 5.5% in August. Export growth was the highest in three months.

Imports rose 18.7% year-on-year in September in U.S. dollar terms, higher than

the MNI survey median forecast for a 14.0% y/y gain and above the 13.3% rise in

August. Imports rose for the 11th month in a row, and the September gain was the

highest since March's 20.3% gain. China posted a $28.47 billion trade surplus in

September, lower than the MNI survey median forecast for a $37.30 billion

surplus and well below August's $41.99 billion surplus. It was the lowest level

in six months. In yuan terms, exports rose 9% in September to CNY1.33 trillion

and imports increased 19.5% to CNY1.13 trillion, compared with 6.9% and 14.9%

gains, respectively in August. The trade balance was in surplus by CNY193

billion, shrinking 32% compared with the CNY286.49 billion surplus in August.

The trade balance in the first three quarters of the year amounted to $295.58

billion, below the $396.36 billion surplus in the same period last year, with

exports rising 7.5% y/y and imports up 17.3% y/y.

     TOP NEWS: Foreign direct investment (FDI) into China rose 17.3%

year-on-year to CNY70.63 billion in September, accelerating over the 9.1% growth

seen in August, the Ministry of Commerce said Friday in a statement on its

website. For the first nine months, FDI increased 1.6% on an annualized basis to

CNY618.57 billion, excluding investment in the financial sector, compared with a

0.2% decrease during the first eight months, the ministry said.

     LIQUIDITY: The People's Bank of China injected CNY498 billion in one-year

Medium-Term Lending Facility (MLF) instruments into the market on Friday, with

the rate unchanged at 3.2%, the central bank said on its official website. The

PBOC did not conduct open-market operations. This resulted in a net injection of

CNY394 billion for the day, as a total of CNY20 billion in reverse repos and a

total of CNY84 billion in MLFs matured. An additional CNY355.5 billion in MLFs

will mature this month, including CNY128 billion maturing next Tuesday and

CNY227.5 billion next Wednesday. The PBOC injected a net CNY194 billion this

week via its OMOs and MLFs.

     RATES: The Ministry of Finance sold CNY10 billion in 182-day treasury bills

at a yield of 3.4110% in an auction on Friday. The yield was higher than 3.37%

for bonds with the same maturity in the secondary market on Thursday.

     RATES: The Ministry of Finance sold CNY15 billion in 91-day treasury bills

at a yield of 3.2400% in an auction on Friday. The yield was lower than 3.1668%

for bonds with the same maturity in the secondary market on Thursday.

     RATES: Money market rates fell Friday after the PBOC injected a net CNY394

billion in liquidity via its Medium-Term Lending Facility. The seven-day repo

average was last at 2.8239% on Friday, lower than Thursday's average of 2.8299%.

The overnight repo average was at 2.5551%, lower than Thursday's 2.6014%.

     YUAN: The yuan rose against the U.S. dollar on Friday even though the

People's Bank of China set a weaker daily fixing. The yuan was last at 6.5866

against the U.S. unit, compared with the official closing price of 6.5888 on

Thursday. The PBOC set the yuan central parity rate against the U.S. dollar at

6.5866 on Friday, weaker than Thursday's 6.5808. It was the first weaker fixing

after three straight days of stronger fixings.

     BONDS: The yield on benchmark 10-year China government bonds was last at

3.5926%, down from the previous close of 3.6318%, according to Wind, a financial

data provider.

     STOCKS: Stocks were up, led higher by shares of environment

protection-related companies. The benchmark Shanghai Composite Index closed up

0.13% at 3,390.52. Hong Kong's Hang Seng Index was 0.04% higher at 28,471.54.

     FROM THE PRESS: The tighter bias in the People's Bank of China's monetary

policy will last for a few years and the deleveraging process for state-owned

companies will need another three to five years, Li Yang, a senior researcher

with the Chinese Academy of Social Science and advisor to top leaders, told the

China Securities Journal in an interview published Friday. Risk controls will

focus on deleveraging, particularly among SOEs, through managing non-performing

assets, reducing excess inventories and eliminating zombie companies, Li said.

It will be a challenge to deal with the downward pressure deleveraging will put

on economic stability, he said. Local government debt risks have been

accumulating since 2015, Li noted, adding that as of the end of 2016, combined

central and local government debt was equal to 22.7% to 28% of GDP. China needs

to enhance comprehensive reforms to reduce local governments' intentions to

increase their debt loads, Li suggested. (China Securities Journal)

     The issuance of enterprise bonds has supported infrastructure projects and

key strategic sectors effectively, the Securities Daily reported Friday, citing

an official with the National Development and Reform Commission (NDRC). In the

past five years, the NDRC has approved the issuance of 2,206 enterprise bonds

totaling CNY3.26 trillion. Since the minimum credit rating requirement for

enterprise bonds is high, issuers are mainly state-owned enterprises, local

government financing vehicles and big companies, the report noted, so the public

service sector benefits from issuance of the bonds. The NDRC will further

strengthen regulation of fund-raising via bond issuance and strictly ban local

governments from providing guarantees and fiscal subsidies to relevant

enterprises, the report said. (Securities Daily)

     Vehicle sales in China continued to rise in September, with the performance

of the commercial vehicle sector leading the gains, the China Association of

Automobile Manufacturers (CAAM) said on its website late Thursday. On a

month-on-month basis, total vehicle sales, comprising both passenger cars and

commercial vehicles, jumped 23.9% to 2.71 million units, compared with a growth

rate of 10.89% in August, according to CAAM. On a year-on-year basis, total

vehicle sales rose 5.7%, compared with 5.27% growth in August. In the first nine

months of the year, sales increased 4.5% year-on-year to 20.23 million units,

compared with 4.25% growth in the January-August period.

     The mortgage interest rate for first home purchases rose to 5.22% on

average in September, the ninth straight increase, but the size of the rise was

smaller than previous increases, the Economic Information Daily reported Friday,

citing analysts. The mortgage rate is likely approaching its peak since the

current rate is now 1.06 times the benchmark rate, the report said. The time

that banks are taking to approve mortgage loans has increased because banks are

being more cautious about extending loans due to their limited credit quotas.

This problem is expected to worsen in the fourth quarter and early next year as

banks strictly control the increase in their mortgage lending, the report

warned. (Economic Information Daily)

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

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

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