MNI China Daily Summary: Monday, July 31

     TOPS NEWS: In response to U.S. President Donald Trump's tweet over the

weekend saying China is doing "nothing" to help denuclearize North Korea,

Huanqiu.com, a website associated with the official newspaper Global Times, said

in a commentary late Sunday that Trump's remark was a "layman's comment." It is

unreasonable for Trump to blame China for the problem, and this remark should

not be seen as American policy, the commentary said. Trump's remark that "China

could easily solve the problem" is the kind of comment made by an outsider who

has only limited knowledge of the Korean problem, it said. The U.S. is always

trying to take charge in solving the North Korean threat, Huanqiu said, adding

that the United States should respect China's proposals on the problem. China is

the country paying the highest cost to solve the problem, like the sanctions

Beijing has already imposed on North Korea, it said. Washington has put Beijing

in a bind on the Korean Peninsula problem, especially with its deployment of the

THAAD anti-missile defense system in South Korea, which seriously threatens

China's national security, Huanqiu said. (Huanqiu/Global Times)

     DATA: The official China manufacturing purchasing managers index (PMI),

jointly released by the China Federation of Logistics and Purchasing (CFLP) and

the National Bureau of Statistics, fell to 51.4 in July from 51.7 in June. The

July reading was the first fall since April this year. The services PMI also

fell in July, to 54.5 from 54.9 in June, the 10th consecutive month that the

reading has been above the 54 mark, which reflects considerable strength, the

CFLP/NBS data show.

     RATES: The PBOC announced on its website Monday morning that it injected

CNY160 billion in liquidity via seven-day and CNY80 billion via 14-day reverse

repos, with rates unchanged at 2.45% and 2.60%, respectively. It gave no

explanation for the injection. This resulted in a net zero injection/drain for

the day, as a total of CNY240 billion in reverse repos matured on Monday. The

CFETS-ICAP money-market sentiment index ended at 45 on Friday, down from 55 at

Thursday's close. The lower the reading, the better the liquidity conditions in

the interbank market.

     RATES: Money market rates were down. The seven-day repo average was last at

2.7911%, lower than Friday's average of 2.8543%. The overnight repo average was

at 2.7964%, lower than Friday's 2.8613%.

     YUAN: The yuan rose against the U.S. dollar after the PBOC set a stronger

fixing. The yuan was last at 6.7231 against the U.S. unit, compared with the

official closing price of 6.7429 on Friday. The PBOC set the yuan central parity

rate against the U.S. dollar at 6.7283, stronger than Friday's 6.7373, marking

the highest fixing since 6.7157 on Oct. 14 last year.

     BONDS: The yield on benchmark 10-year China government bonds was last at

3.7469%, down from the previous close of 3.7931%, according to Wind, a financial

data provider.

     STOCKS: Stocks were up, led higher by the ferrous metal mining, coal mining

and train freight sectors. The benchmark Shanghai Composite Index closed up

0.61% at 3,273.03. Hong Kong's Hang Seng Index was 1.19% higher at 27,299,78.

     FROM THE PRESS: The China Banking Regulatory Commission's focus in the

second half of the year will be on the industry contributing more to the real

economy, as well as on implementing risk controls and deepening reforms, the

commission said in a statement Saturday on its website at the conclusion of its

half-year work meeting in Beijing. The commission stressed the need to deal more

strongly with bad loans and prevent new loans from increasing too sharply, and

the need to control risks in the banking sector, including liquidity. The

commission also said supervision needs to be strengthened over the bills

business, cross-sector business, banks' lending to the property sector and local

government financing. It announced it would try to enact 18 new regulations by

the end of the year.

     Controlling financial risks will be the next focus for monetary and fiscal

policies, the Economic Information Daily, a newspaper under the official Xinhua

News Agency, said Monday. The newspaper based its forecast on the announcements

that followed recent government meetings, adding that prudent monetary policy

will continue. Analysts say that deleveraging and risk prevention will be major

tasks, and that monetary policy will trend neither tight nor loose, the

newspaper said. It also cited comments on Friday from the China Banking

Association's chief economist, Ba Shusong, that returning to a prudent interest

rate level will provide the most beneficial monetary environment for the steady

slowdown of debt ratios.(Economic Information Daily)

     China's public-private partnership programs are developing rapidly, but

their supervision needs to be strengthened, the official Xinhua News Agency

reported Sunday. As of the end of June, 13,554 registered projects had a total

investment of CNY16.3 trillion, of which 2,021 projects were confirmed with an

investment of CNY3.3 trillion. Wang Yiming, vice director of the Development

Research Center of the State Council, was quoted as saying that China's

public-private partnerships are now "in the fast lane." A researcher from the

Meng Chun center said that local governments need to abandon illegal practices

to get financing through PPP projects and that partnership development needs to

be standardized and better regulated, the report said. (Xinhua)

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

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

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