MNI China Daily Summary: Monday, January 7

     DATA: The value of China's foreign exchange reserves increased by $11.0

billion to $3.07 trillion in December, a second consecutive monthly rise. The

level was still the third-lowest for 2018, although up from October's low of

$3.05 trillion and November's $3.06 trillion. The improvement was driven by

exchange rate effects and changes in asset prices, as well gains in the price of

foreign treasury bonds, the State Administration of Foreign Exchange said today.

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

today, breaking a 14-day run of liquidity injection by reverse repos. This

resulted in a net drain of CNY170 billion as the same amount of reverse repos

matured today, according to Wind Information. The PBOC said liquidity at the

banking system was at a relatively high level.

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

institutions (DR007) decreased to 2.2808% from Friday's close of 2.3401%, Wind

data showed. The overnight repo average decreased to 1.3790% from Friday's

1.5889%.

     Yuan: The yuan appreciated to 6.8499 against the U.S. dollar from Friday's

close of 6.8645. The PBOC set the dollar-yuan central parity rate stronger at

6.8517 on Monday, compared with 6.8586 last Friday.

     STOCKS: The benchmark Shanghai Composite Index rose 0.72% to 2,533.09. Hong

Kong's Hang Seng Index increased 0.82% to 25,835.70.

     BONDS: The yield on the benchmark 10-year China Government Bond was last at

3.1650%, up from the closing of 3.1600% on Friday, according to Wind

Information.

     FROM THE PRESS: China's economic growth rate is expected to trough after

the first quarter and growth may stabilize in April and May, said China Business

News late Sunday, citing Sheng Songcheng, a former advisor to the People's Bank

of China. Government stimulus is taking a longer time to kick into the real

economy this time. Sheng said the yuan exchange rate won't fall below the

psychological 7 level against the U.S. dollar this year, and could appreciate,

the newspaper said.

     The market is expecting a few more reserve ratio cuts this year, following

the central bank's one-percentage-point cut last Friday, said China Business

News today. The PBOC should cut by a total 400 basis points in 2019, said the

newspaper, citing Xing Ziqiang, chief economist at Morgan Stanley China. Ren

Zeping, chief economist at Evergrande, also suggested the PBOC may make at least

three more RRR cuts this year, as well as lowering the rate on open market

operations and its Medium-term Lending Facility, the newspaper said.

     Private enterprises are being encouraged to participate in major national

technology projects, said Xinhua News Agency late Sunday, citing Wang Zhigang,

Minister of Science and Technology. The Ministry will push universities and

research institutes to transfer their work to private companies, and quickly

bring competitive products to market.

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

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]