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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
     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:
--MNI Sydney Bureau; +61 405322399; email:
[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]

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