MNI China Daily Summary: Monday, August 26

     POLICY: China's six new pilot free trade zones (FTZs) are expected to

become investment hotspots for foreign capital, according to Wang Shouwen, Vice

Minister of Commerce. Speaking at a briefing today, Wang said the new zones in

Shandong, Jiangsu, Guangxi, Hebei, Yunnan and Heilongjiang provinces will soon

be open for investment. FTZs have a shorter "negative list" detailing sectors in

which foreign investment is banned than other cities in China, and this makes

them attractive to European and American investors, according to Wang. He said

the existing 12 FTZs had attracted around CNY70 billion of foreign investment

for the first half of this year, a 20% y/y increase. 

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

(OMOs). This resulted in a net drain of CNY20 billion given the maturity of

CNY20 billion in reverse repos, according to Wind Information.

     The PBOC injected CNY150 billion via one-year medium-term lending facility

(MLF) on the same day, according to a statement on its website. The injection is

CNY1 billion more than the amount of MLF maturing today, Wind Information said.

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

institutions (DR007) rose to 2.6826% from Friday's close of 2.6427%, Wind

Information showed. The overnight repo average increased to 2.6414% from

Friday's 2.5864%.

     YUAN: The yuan closed at 7.1528 against the U.S. dollar from Friday's close

of 7.0825. The PBOC the dollar-yuan central parity rate lower at 7.0570,

compared with 7.0572 on Friday.

     BONDS: The yield on the 10-year China Government Bond was last at 3.0525%,

down from Friday's close of 3.0650%, according to Wind Information.

     STOCKS: The benchmark Shanghai Composite Index fell 1.17% to 2,863.57. Hong

Kong's Hang Seng Index dropped 1.91% to 25,680.33.

     FROM THE PRESS: Remarks by U.S. President Donald Trump ordering American

companies to leave China would not impact on the Chinese economy because Beijing

has made full preparations for an escalation in the trade war, according to an

editorial in the Global Times on Sunday. The editorial says the Chinese market

is important for multinational companies, and Chinese domestic demand was an

advantage in stabilizing the economy in the face of what it called American

hysteria. If bi-lateral relations continued to deteriorate, the Times says

Washington will pay a price in any reshaping of global production.

     The PBOC's move to base personal mortgage interest rates on the newly

released loan prime rate (LPR) is expected to push mortgage interest rates

higher, Securities Daily reports. Citing analysts, the Daily said higher rates

were also more likely to impact second home purchases and be applied in housing

market hotspots. The central bank has set the lower limit of mortgage loan rates

with the rate for a first home no lower than the LPR of a corresponding tenor,

and the rate for a second home no less than 60 bps above the LPR, the newspaper

said.

     China has adequate macro-policy tools to maintain its healthy economic

development and ensure the fundamental strength of the economy, according to the

country's Vice Premier Liu He. Speaking at an Expo in Chongqiong city, Liu said

the Chinese economy is shifting from a period of high-speed growth to one of

high-quality development. In his remarks, reported by Cailian Press, Liu said

China would continue to be driven by new, rather than old, economic drivers.

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

--MNI Sydney Bureau; +61 405322399; email: lachlan.colquhoun.ext@marketnews.com

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