MNI China Daily Summary: Friday, September 15

     TOP NEWS: Deleveraging is the key for China's financial sector to serve the

real economy, so the government should insist on implementing a prudent and

neutral monetary policy, Liu Guoqiang, assistant governor of the People's Bank

of China, said Friday at the Financial Street Forum 2017 sponsored by the

Beijing government. China's financial regulators need to strictly control the

illegal arbitrage and messy off-balance sheet transections occurring on the

market, Liu said. Financial institutions must reduce the businesses jeopardizing

economic development and focus on supply-side reform, Liu stressed, warning that

the support given to so-called zombie companies, along with illegal debt-raising

by local governments and the property sector, must be slowed.

     TOP NEWS: Some fluctuations of foreign investment into China are normal at

a time when global cross-border economic cooperation is still recovering, Meng

Wei, the National Development and Reform Commission spokeswoman, said Friday at

a press briefing in Beijing. China is still in the process of restructuring and

upgrading its foreign direct investment (FDI) regime, with its growth, structure

and momentum all readjusting, Meng said. She stressed that China is still one of

the top investment destinations for global investors, and that China will

continue to take measures to improve its investment environment. In the first

half of the year, foreign investment in China's property and retail sectors

dropped, but high-tech manufacturing and high-tech service FDI inflows saw

relatively fast growth, according to Meng.

     DATA: China's Ministry of Commerce and other government departments will

"issue detailed measures at an appropriate time" regarding the latest United

Nations' Security Council economic and trade sanctions against North Korea,

according to the ministry's website Thursday. The y/y growth rate of China-North

Korea trade has been falling recently, ministry spokesman Gao Feng said. The

growth rate was 10.2% in the first seven months of the year and was expected to

drop to below 10% in the January-to-August period. Gao said imports from North

Korea had fallen 16.3% from January to July.

     POLICY: The National Development and Reform Commission approved eight

fixed-asset investment projects totaling CNY10.76 billion in August, NDRC

spokeswoman Meng Wei said at at news briefing Friday. The projects are mainly in

the high-tech and hydraulic engineering sectors.

     POLICY: Local government debt has become one of the key risks in the

financial sector, Fan Gang, a monetary policy committee member of the People's

Bank of China, said Friday at the Financial Street Forum 2017 sponsored by the

Beijing government. Funding for infrastructure construction projects should come

through long-term public debts, not through non-financial funding or bank loans,

Fan noted. During the previous economic crisis, local governments set up funding

vehicles and loaned out short-term funds which needed to be repaid before any

long-term infrastructure projects related to the funds could make profits,

hurting the financial system, Fan said. China needs to issue long-term yuan

public debts as it carries out its "One Belt, One Road" initiative.

     POLICY: The China Banking Regulatory Commission has started to optimize a

series of regulations to guide financial institutions in supporting the real

economy and will implement the regulations at a proper pace, CBRC Vice Chairman

Wang Zhaoxing said Friday at the Financial Street Forum 2017. As of the end of

June, the outstanding volume of entrusted loans, wealth management products and

interbank liabilities and assets had decreased due to effective regulations

being implemented in the first half of the year, Wang noted. Banks should

continue to improve credit resource allocation and carry out differentiated

mortgage policies to meet the purchase demands of first-time homebuyers rather

than speculators, Wang suggested. Banks also needs to push forward the

market-oriented debt-to-equity swaps and deepen deleveraging, Wang added.

     RATES: Money market rates were down as the PBOC injected a net CNY200

billion for the day -- the largest injection via reverse repos since Jan. 18 --

to hedge the tightening effect from seasonal tax payments and required-reserve

payments to keep overall liquidity stable. The seven-day repo average was last

at 2.8784%, lower than Thursday's average of 2.9109%. The overnight repo average

was at 2.6922%, also lower than Thursday's 2.6925%.

     YUAN: The yuan rose against the U.S. dollar after the PBOC set a stronger

fixing for the day. The yuan was last at 6.5425 against the U.S. unit, stronger

than the official closing price of 6.5543 on Thursday. The People's Bank of

China set the yuan central parity rate against the U.S. dollar at 6.5423 Friday,

slightly stronger than Thursday's 6.5465.

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

3.5783%, down from the previous close of 3.5911%, according to Wind, a financial

data provider.

     STOCKS: Stocks were down, led lower by the steel, coal and non-ferrous

metals sectors. The benchmark Shanghai Composite Index closed 0.53% lower at

3,353.62. Hong Kong's Hang Seng Index was 0.04% higher at 27,788.18.

     FROM THE PRESS: North Korea launched a missile shortly before 07:00 a.m.

Friday Japan Standard Time time (22:00 GMT Thursday). It overflew Japan's

northern island of Hokkaido and headed into the Pacific, The Wall Street Journal

reported Friday, quoting the Japan government's alert system. No damage or

injuries were reported. (The Wall Street Journal)

     China hopes the U.S. makes "solid steps" to reduce restrictions on exports

to China and facilitate a balanced, stable and healthy development of Sino-U.S.

trade, Ministry of Commerce spokesman Gao Feng said Thursday, according to the

ministry's website. In the first eight months of the year China's imports from

the U.S. rose 20.1% to $100.4 billion -- the highest in almost five years and

higher than the 13.5% overall Sino-U.S. trade growth rate as well as the 11.2%

growth rate of China exports to the U.S., Gao said. China has never purposely

pursued a trade surplus with the U.S., and current conditions are the result of

market forces, Gao said.

     Several Tier-3 and Tier-4 cities, including Xi'an, Lanzhou, Yangzhou and

Taizhou, have introduced new policies to cool their property markets, the

Shanghai Securities News reported Friday. September and October may see new

policies to control rising home prices -- especially in Tier-3 and Tier-4 cities

where the market is heating up, the newspaper said, quoting analysts.

Macroeconomic controls on home and land prices aren't likely to be eased before

a long-term effective system is built for the property sector, the report said.

(Shanghai Securities News)

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

--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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