MNI China Daily Summary: Monday, August 19

     DATA: China banks sold a net CNY28.3 billion equivalent FX on behalf of

clients in July, less than the net sale of CNY131.4 billion in June, indicating

FX outflows were decelerating, according to data released by the State

Administration of Foreign Exchange (SAFE) today. 

     LIQUIDITY: The People's Bank of China (PBOC) injected CNY20 billion via

7-day reverse repos on Monday, adding liquidity for a sixth consecutive day.

This resulted in a net drain of CNY10 billion, however, given the maturity of

CNY30 billion of reverse repos, according to Wind Information.

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

institutions (DR007) rose to 2.6745% from Friday's close of 2.6731%, Wind

Information showed. The overnight repo average increased to 2.6663% from

Friday's 2.6613%.

     YUAN: The yuan closed at 7.0445 against the U.S. dollar from Friday's close

of 7.0446. The PBOC set the dollar-yuan central parity rate higher at 7.0365,

compared with 7.0312 set last Friday.

     BONDS: The yield on the 10-year China Government Bond was last at 3.0175%,

down from Friday's close of 3.0225%, according to Wind Information.

     STOCKS: The benchmark Shanghai Composite Index rose 2.10% to 2,883.10. Hong

Kong's Hang Seng Index increased 2.17% to 26,291.84.

     FROM THE PRESS: The PBOC's reform to link the benchmark lending interest

rate with the loan prime rate (LPR) and the medium-term lending facility (MLF)

would enable the central bank to effectively "cut rates" by lowering the rate of

MLF, China National Radio reported. Citing interviews with analysts, the

broadcaster noted market players' concern that a lower lending rate could lead

to the narrowing of banks' interest rate spreads and adversely affect commercial

banks. Ma Jun, a member of the PBOC's Monetary Policy Committee, believes it is

hard to say whether the interest rate spread will decline or by how much it

might decline as it is dependent on lending demand, risk premiums and policy

rates. 

     The PBOC will focus on increasing the use of structural monetary policy

tools and reducing the financing costs for business in the second half of 2019,

the PBOC-run newspaper Financial News reported. This would include the use of

targeted reserve requirement ratio (RRR) cuts, targeted medium-term lending

facilities (MLFs), refinancing and rediscounting, the newspaper said. The

central bank's latest move to link the loan prime rate (LPR) with the benchmark

lending interest rate is expected to ease the financing pressure on enterprises,

the Financial News report said.

     U.S. accusations against China of forced technology transfer shows a fear

of China's technological progress, People's Daily said in a commentary. China

welcomes foreign investors and has not set a threshold for technology transfer

in the past and would not do so in the present or future, the Daily said.

Meanwhile, the U.S. has blocked Chinese investors from investing in American

technology firms, has restricted high-tech exports to China and uses state power

to crack down on Chinese tech companies, 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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