MNI China Daily Summary: Friday, September 5

     TOP NEWS: China and the U.S. have agreed unanimously to work together and

create a constructive atmosphere for the 13th round of trade talks set for early

October in Washington, said Gao Feng, a Ministry of Commerce spokesman today,

when asked if the U.S. will delay its planned tariff hikes on Oct 1. According

to Gao, the senior negotiators had very good phone call this morning. China's

Vice Premier and top trade negotiator Liu He, senior U.S. Trade Representative

Robert Lighthizer and U.S. Secretary of the Treasury Steven Mnuchin all spoke to

confirm the meeting arrangements. 

     EXCLUSIVE: A meeting between Chinese and U.S. trade negotiators is likely

to proceed this month, although expectations for progress should be limited,

government advisors told MNI. The latest round of tariff hikes by the two

countries raised doubts over whether the meeting in Washington would go ahead as

scheduled. But Chen Wenling, Chief Economist at the China Center for

International Economic Exchanges, said Vice Premier Liu He aims to "resolutely

oppose trade war escalation" and that while China will not concede its key

principles, it wants to resolve disputes rationally.

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

(OMOs), leaving liquidity unchanged with no maturing reverse repos, according to

Wind Information. The liquidity in the banking system is at a reasonable and

ample level, after absorbing the issuance of government bonds and paying the

reserve requirement, the PBOC said.

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

institutions (DR007) rose to 2.6239% from 2.5860% on Wednesday, Wind Information

showed. The overnight repo average increased to 2.5381% from 2.4446% yesterday.

     YUAN: The yuan strengthened to 7.1459 against the dollar from Wednesday's

close of 7.1538. The PBOC set the dollar-yuan central parity rate lower for a

second time in eight trading days at 7.0852, compared with 7.0878 on Wednesday.

     BONDS: The yield on 10-year China Government Bond was last at 3.0125%, down

from the close of 3.0400% on Wednesday, according to Wind Information.

     STOCKS: The benchmark Shanghai Composite Index gained 0.96% to 2,985.86.

Hong Kong's Hang Seng Index decreased 0.03% to 26,515.53.

     FROM THE PRESS: The PBOC is very likely to cut the reserve requirement

ratio (RRR) in September, after the State Council called for general and

targeted RRR cuts in a timely manner in a Wednesday meeting, the Shanghai

Securities News reported. The State Council also called for lowering the real

rate and increase support for the real economy, especially for private and small

companies, the newspaper said.

     The PBOC will increase fine-tuning of monetary policy in H2, based on

changes in economic growth and price levels, Dong Ximiao, a researcher at

National Institution for Finance & Development, wrote in the PBOC-run newspaper

Financial News. Any cuts to RRRs or interest rates should be more targeted and

structural, said Dong.

     China's main priority should be stabilizing growth, which also boosts

confidence in negotiations with the U.S., said CDF Insight citing Huo Jianguo,

vice chairman of the China Society for World Trade Organization Studies. China's

growth next year could remain above 6%, if it increases the counter-cyclical

adjustment of macro policies to boost domestic growth momentum. China's economy

will bottom out if the trade talks can achieve the desired results and domestic

reforms can be further accelerated, according to Huo.

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

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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