MNI China Daily Summary: Monday, January 29

     TOP NEWS: China's switch to pursuing high-quality growth away from the

previous emphasis on grow rates doesn't mean local governments should let their

economies idle, the People's Daily said in a commentary.

 - Recent economic data released by some local governments showed a rapid drop

in GDP growths, indicating flaws in industry structures: Daily

 - Quality of growth needs to be considered together with optimized rate of

growth, and the quality and structure of the economy: Daily

 - New drivers and industries should be supported: Daily.

 ***TAKEAWAY: A relatively high GDP growth is still one of China's goals. The

government may still give specific GDP targets at the National People's Congress

in March.

     TOP NEWS: China's currency surged to the highest level in almost 18 months

on a trade-weighted basis against those of its major trading partners, according

to weekly data released Monday by the People's Bank of China.

 - The CFETS Weekly RMB Index, which measures the yuan relative to a basket of

24 currencies, gained 0.47% last week from a week ago to 95.70, the highest

since June 17, 2016, when the trade-weighted index stood at 95.82.

 ***COMMENT: The RMB index has risen 0.90% so far this year, compared with a

0.02% appreciation through the whole of 2017. Some in the market believe that

the RMB's surge may prompt the PBOC to intervene if it touches 96, since the

immediate impact may slow China's exports.

     LIQUIDITY: The PBOC skipped its Open Market Operations (OMO) on Monday,

stating that the orderly use of Contingent Reserve Allowances (CRA) and fiscal

expenditure can absorb the effects of maturing reverse repos and cash

withdrawals.

 - Net drain of CNY140 billion today after same amount of reverse repos mature 

 - A total of CNY760 billion in reverse repos will mature this week

     RATES: Interbank market rates diverged after PBOC drained a net CNY140

billion via skipping open-market operations.

 - 7-day repo average last at 2.9001%, lower than 2.9194% yesterday

 - Overnight repo average 2.5570%, up from 2.5089% yesterday.

 ***COMMENT: The PBOC returned to its "neutral and tight" bias after unexpected

largess in the past two weeks. Today was the third trading day that the central

bank skipped its OMOs, which has drained CNY530 billion. There is a rumour,

unconfirmed, that the PBOC asked the big banks to stop lending overnight capital

to non-banking institutions via "window guidance" on Friday.

     YUAN: The Chinese yuan fell slightly to 6.3237 against the U.S. dollar from

Friday's 6.3227 closing.

 - The PBOC set the yuan central parity rate vs the U.S. dollar at 6.3267 on

Monday, stronger than last Friday's 6.3436. PBOC has set the fixing stronger for

seven consecutive trading days. 

 - Today's fixing marks the highest since Nov 2, 2015.

***COMMENT: China International Capital Corporation (CICC) raised 2018 year-end

USD/CNY forecast to 6.18 from 6.28 on Monday, on the back of its downward

adjustment of 2018 USD index forecast. CICC expects some of the ad-hoc capital

control measures to be lifted, especially those concerning individual FX usage.

     BONDS: Yield on 10-year China government bonds last traded 3.9400%, up from

3.9350% close Friday: Wind Information

     STOCK: The Shanghai Composite Index closed down 0.99% to 3,523.00, while

the Hang Seng Index in Hong Kong fell 0.29% to 33,059.00.

     FROM THE PRESS: U.S. President Donald Trump offered nothing new in his

speech at the World Economic Forum in Davos, maintaining an America-centric

rhetoric, the China Daily commented on Sunday evening.

 - Trump's speech "had little to do with the core concern of the Davos

gathering" which aims to bring countries together for world development;

instead, he promoted his own achievements and tried to attract foreign

investment: Daily

 - Trump is hoping others will "make the U.S. great again"; free trade is never

to his taste: Daily.

 - Trump's protectionist policies will further divide the world, Daily said.

     China should strictly prohibit credit illegally flowing into the property

sector, and deny loans to unqualified developers, Financial News said. 

- Banks shall not help fan speculation and worsen the property bubble: News. 

- China stressed on Friday that regulators should curb household debt, prohibit

illegal credit from going into property market: CBRC 

- Gov't needs to crack down on loans disguised as consumer purchases but in fact

were intended for home purchases: Financial News 

***TAKEAWAY: Banks will continue to curb credit available to property sector.

Developers will face difficulty in obtaining financing, further slowing

investment.

     The banking sector will continue to be strictly monitored, CBRC said

Saturday following a two-day meeting.

 - CBRC emphasized risk control and maintaining financial stability;

 - To clamp down on regulatory officials derelict in their duties, and to hold

them accountable.

--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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