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CHINA RATES

China Repo Rates Decline: Wind

CHINA PRESS

EU Should not Risk Invest Agreement: China Daily

JGB TECHS

(M1) Bullish Focus

AUSSIE 10-YEAR TECHS

(M1) New Multi-Month Highs

MNI (London)
     TOP NEWS: China can extend positive grown momentum into 2018, NDRC
spokesman Yan Pengcheng said at a press briefing on Monday.
- "Unbalanced and insufficient development" needs further attention to improve
China's economy and achieve sustainable growth. 
- China still supports outbound investment by qualified companies; will further
regulate outbound investment to ensure authenticity and legality: Yan 
- China's capacity reduction in 2017 exceeded its annual goal of 150 million
tonnes coal, 50 million tonnes steel, and 50 million kilowatts in coal-fired
electricity generation: Yan 
- China will control risks and scale of corporate bonds, tackle corporate bond
default risks; this will help curb local government debt: Yan 
****TAKEAWAY: High-quality growth is a goal for China; China's campaigns such as
capacity cutting and risk controls will continue.
     LIQUIDITY: The PBOC injected CNY60 billion in 7-day reverse repos, CNY40
billion in 14-day reverse repos, and CNY10 billion in 63-day reverse repos in
Open Market Operations (OMO).
- Net CNY20 billion injection after CNY90 billion reverse repos mature 
- A total of CNY820 billion in reverse repos will mature this week 
- A total of CNY107 billion in medium-term lending facility (MLF) loans will
mature on Wednesday, Jan. 24 
     RATES: Interbank market rates fell after the PBOC injected a net CNY20
billion by open market operations. 
- 7-day deposit repo average was last at 2.9125%, lower than 2.9225% Friday 
- Overnight deposit repo average at 2.7487%, lower than 2.8554% Friday.
     YUAN: The yuan weakened against the U.S. dollar even thought the People's
Bank of China set a stronger daily fixing. 
- The yuan was last at 6.4120 against the greenback, falling 0.12% from Friday's
official closing price of 6.4040.
- PBOC set the yuan central parity rate vs U.S. dollar at 6.4112, stronger than
Friday's 6.4469. 
- Today's fixing was the highest since Dec. 8, 2015.
     BONDS: Yield on 10-year China government bonds last traded 3.9600%, down
from 3.9750% at close on Friday: Wind Information.
     STOCK: Stocks rose in Shanghai, led by shares of appliances companies. The
benchmark Shanghai Composite Index closed up 0.39% at 3,501.36. Hong Kong's Hang
Seng Index rose 0.36% at 32,366.73.
     FROM THE PRESS: The Chengdu Branch of Shanghai Pudong Development Bank was
fined CNY462 last week by China's banking regulator for illegally loaning as
much as CNY77.5 billion to shell companies as cover-ups for its non-performing
loans, Shanghai Securities News reported over the weekend. Top management
associated with the scandal were fined and charged, as well as barred for life
from working in banking, while 195 lower-level executives were disciplined, it
said. Pudong Bank said in an exchange filing that the fine's impact is
immaterial to the bank's operations. 
***COMMENT: Some Chinese commercial banks, under regulatory pressure to reduce
high NPL ratios, lent without due diligence to SOEs. These loans increased the
risk of defaults and made it harder for private companies to obtain capital.
     China is clamping down on the use of local government funding vehicles
(LGFVs), the 21st Century Business Herald reported Monday. The central
government is enforcing debt swaps or separating LGFVs to independent companies
to reveal invisible debt held by local authorities. The process of regulating
LGFVs is slow and difficult given that it ties to the local economies and that
it gets implicit guarantee from local governments, it said. 
***COMMENT: LGFVS were was created to help local governments meet targets. Local
officials are pressured by evaluations from central government. Irregularities
presented by LGFVs therefore cannot be eliminated without overhauling the fiscal
structure. These on-again and off-again approaches will not resolve the issue.
     The debt ratios of SOEs and local governments need to be closely watched,
Li Yang, a researcher with the Chinese Academy of Social Science and advisor to
China's leadership, said in a forum at the Renmin University on Sunday. With
China experiencing slower growth, excess production capacity and a difficult
investment environment, rising leverage ratios, debt and non-performing loans
are posing more risks, Li said. China's financial system is marked by that
borrowers need to continue refinancing loans - due to the lack of long-term
financing options - and not by capital shortage, Li said. China should boost the
use of equity in its capital market and establish long-term credit institutions,
Li said.
--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
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MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com