MNI China Daily Summary: Friday, October 18

     EXCLUSIVE: Chinese President Xi Jinping and U.S. counterpart Donald Trump

could sign a preliminary trade deal during the APEC meeting in Chile in

mid-November, perhaps opening the way to a second-phase deal including

guidelines on managing the yuan, government advisors told MNI. "It is very

likely that the two heads of state will meet next month, and sign the phase-one

agreement," said Mei Guanqun, deputy researcher at the China Center for

International Economic Exchange, a think tank managed by the National

Development and Reform Commission. The U.S. and China have agreed to divide

negotiations over their trade dispute into three phases, with the first phase

containing the overall outline for talks, Mei said on Thursday.

     POLICY: China's economy will remain stable into the fourth quarter after

record-low growth of 6% in Q3, said Mao Shengyong, spokesman of the National

Bureau of Statistic at a briefing Friday. There are favourable signs including

strengthened PMI, recovery of infrastructure investment in recent two months,

slower deflation of producer prices and improved car production and sales. A low

base of growth in Q4 last year also helps boost Q4 numbers, Sheng said.

     DATA: China's Q3 GDP growth slowed to 6% y/y from Q2's 6.2%, posting the

slowest pace of growth since records began in the first quarter of 1992.

Industrial output growth jumped to 5.8% y/y in September from August's 4.4%

gain, hitting a three-month high, surpassing the 4.9% projection. Fixed-asset

Investment recorded 5.4% growth y/y, edging down from 5.5% in the Jan-Aug period

and underperforming the 5.5% median forecast. Retail sales rose 7.8% y/y, in

line with market consensus and edging up from Aug's 7.5% to register a

three-month high.

     LIQUIDITY: The People's Bank of China (PBOC) injected CNY30 billion via

7-day reverse repos, injecting net CNY30 billion as no instruments matured,

according to Wind Information.

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

institutions (DR007) increased to 2.6997% from Thursday's close of 2.6562%, Wind

Information showed. The overnight repo average rose to 2.6183% from Thursday's

2.5817%. 

     YUAN: The currency strengthened to 7.0825 against the dollar from

Thursday's close of 7.0841. The PBOC set the dollar-yuan central parity rate

stronger at 7.0690, compared with 7.0789 on Thursday.

     BONDS: The yield on 10-year China Government Bonds was last at 3.1825%, up

from the close of 3.1625% on Thursday, according to Wind Information. 

     STOCKS: The Shanghai Composite Index tumbled 1.32% to 2,938.14, following

the release of worse-than-expected GDP figure. Hong Kong's Hang Seng Index edged

down 0.48% to 26,719.58. 

     FROM THE PRESS: The PBOC is unlikely to cut interest rates this year, the

Securities Daily reported citing Zhang Jun, chief economist at Morgan Stanley

Huaxin Securities. China's economic growth is unlikely to stall, and monetary

policy should remain stable while economic fundamentals are resilient, the

newspaper said. With the early issuance of next year's local government special

bonds, banks will increase lending and optimize the medium and long-term loan

structure and this is expected to underpin the economy, the newspaper cited

Zhang as saying.

     China's pig production is expected to improve in Q4 although pork supply

will remain tight in the short-term, China Securities Journal reported citing

the Ministry of Agriculture and Rural Affairs. The shortage will keep pork

prices high until February 2020. The government will soon issue CNY300 million

in subsidies for the construction of pig farms, as well as CNY700 million in a

reward fund to encourage pig production, the newspaper said citing the ministry.

     China's household debt is growing at a fast pace and housing mortgages

account for almost 60% of all household debt, the China Securities Journal

reported citing research on leverage ratios among Chinese households. The report

says 47.1% of the mortgages are on vacant houses, which represents a waste of

credit resources, the newspaper said citing Gan Li, director of China Family

Finance Survey and Research Center. Gan recommended an increase in the down

payment ratio for second homes, the newspaper said.

--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

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