MNI China Daily Summary: Monday, March 12

     TOP NEWS: The National People's Congress of China has passed a proposal to

amend the country's constitution, the People's Daily reported Monday. The

two-term limit on how long Chinese presidents can serve has been removed. The

official Communist Party newspaper said the constitutional amendment ensures

"rejuvenation of China".

     TOP NEWS: China would prefer not to engage in a trade war with the U.S.,

but the country will still be diversifying its trading partner portfolio, MNI

learned from the press conference over the weekend held by the Ministry of

Commerce. "China does not want to be involved in a trade war, nor would it start

one," China Minister of Commerce Zhong Shan said at the press event during

China's two-week parliamentary session. "But we are able to counter any

challenge to defend the interests of our country and the Chinese people." Zhong

stressed China will deliver on its promise to further open up its financial

sector and improve intellectual property right protection, although he did not

detail the specific measures that would be taken.

     DATA: China's currency dipped from its rebound last week on a

trade-weighted basis against the currencies of its major trading partners,

according to weekly data released on Monday by the PBOC. The CFETS Weekly RMB

Index, which measures the yuan relative to a basket of 24 currencies, declined

0.33% last week to 95.95. As of Mar 9, the RMB gauge has recorded a 1.16% gain

year-to-date, up from 94.85 on Dec 29, according to MNI's calculations.

     LIQUIDITY: PBOC said on its website Monday morning that it injected CNY50

billion 7-day and CNY40 billion 28-day reverse repos, with rates unchanged at

2.50% and 2.80%, respectively. The PBOC said the operation aimed to cushion the

impact of tax payments and to keep liquidity conditions reasonable and stable.

It resulted in a net injection of CNY90 billion as no reverse repo matures

today. No reverse repos will mature this week, while a total of CNY189.5 billion

in medium-term lending facilities loans will mature on Friday. The CFETS-ICAP's

money-market sentiment index closed at 44 on Friday, up from 41 on Thursday.

     RATES: Money market rates rose after PBOC injected a net of CNY90 billion

via its open-market operations. The 7-day repo average was last at 2.8132%, up

from Friday's average of 2.7542%. The overnight repo average was at 2.5804%

compared with Friday's 2.5620%.

     YUAN: The yuan gained against the U.S. dollar after the People's Bank of

China set a stronger daily fixing. The yuan was last at 6.3266 against the U.S.

unit, rising 0.15% compared with the official closing price of 6.3370 Friday.

The People's Bank of China set the yuan central parity rate vs the U.S. dollar

at 6.3333 on Monday, much stronger than Friday's 6.3451.

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

3.8200%, down from the previous close of 3.8300%, according to Wind.  

     STOCKS: Stocks rose in Shanghai, led by technology companies shares due to

good news over the weekend announced by Ministry of Science and Technology

officials that China will continue support technological advance and

innovations. Mindata Group rose more than 10%. The benchmark Shanghai Composite

Index closed up 0.59% at 3,326.70. Hong Kong's Hang Seng Index was down 1.32%

higher at 31,752.10. 

     FROM THE PRESS: Risk controls and deleveraging will still be key aspects of

China's reform of state-owned enterprises this year, said Xiao Yaqing, head of

the State-Owned Assets Supervision and Administration Commission of the State

Council, over the weekend, reported Securities Times on Monday. The SASAC will

set the warning level of debt ratios for industrial, non-industrial, and tech

and science SOEs, respectively, at 70%, 75% and 65% - all 5% less than before,

Xiao said. Another key task this year will be to improve management of listed

SOEs in order to increase profitability, and to invest more in these companies,

he added.

     Allowing banks to trade government bond futures can be the first step in

establishing a united government bond market in China, said Li Daokui, former

member of the monetary policy committee at the People's Bank of China, according

to Securities Daily on Monday. This will remove some barriers that separate the

interbank treasury market from the exchange market, as currently banks and

exchange houses cannot participate in transactions in the other's market, Li

said. The move will also make commercial banks more willing to purchase

government bond products as futures can buffer some risks, Li noted.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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