MNI China Daily Summary: Monday, May 14

     TOPS NEWS: As Chinese regulators tighten the squeeze on the financial

industry in its widening deleveraging campaign, the once booming wealth

management sector will likely shrink this year, Zeng Gang, head of the banking

research institute at the Chinese Academy of Social Sciences, told MNI in an

exclusive interview. "The central bank may grant more credit quotas to banks

under its macro-prudential assessment scheme this year, which would boost new

loans," Zeng said. In addition, Zeng expected the enforcement of new rules on

asset management products, mostly on wealth management, to be flexible and

conditional on the types of investments.

     TOP NEWS: The People's Bank of China could further lower RRR for banks this

year, China Securities Journal said, citing market participants. The PBOC could

lower RRR two or three times, the journal cited experts saying. Xu Gao, chief

economist at Everbright Securities Asset Management, explained that this is

because social financing scale is still low. The central bank may increase

interest rates this year as the U.S. Federal Reserve further raises interest

rates, but the direction of China's monetary policy is not expected to change,

and will remain neutral leaning tight, said Shen Jianguang, chief economist at

Mizuho Securities. 

     LIQUIDITY: The PBOC injected CNY156 billion by 1-year Medium-term Lending

Facilities (MLF) loans on Monday with the rate unchanged at 3.30%, according to

its official statement. Liquidity remains unchanged as the same amount of MLF

loans matures today while no reverse repos mature. It also said the PBOC

injected a total of CNY80.1 billion via its pledged supplementary lending (PSL)

loans today. CFETS-ICAP's money-market sentiment index closed at 57 on Monday,

up from 38 at Friday's close.

     MONEY MARKET RATES: 7-day repo average rose to 2.7184% from 2.6907% Monday,

after the PBOC's CNY156 billion 1-year MLF injection the same amount of maturing

MLF. The overnight repo average increased to 2.5648% from Monday's 2.4506%.

     YUAN: The yuan fell to 6.3392 against the U.S. dollar from Monday's closing

of 6.3351. Earlier today, The PBOC set the yuan central parity rate at 6.3345

Monday, stronger than last Friday's 6.3524.

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

3.6900%, up from the previous close of 3.6850%, according to Wind Information.

     STOCKS: Shares rose in Shanghai, with a rally in telecommunication stocks

after President Donald Trump tweeted that the U.S. will work with China to help

ZTE "get back in business," with Zhong Fu Tong Group up by the daily-limit 10%.

The benchmark Shanghai Composite Index closed 0.34% higher at 3,174.03. Hong

Kong's Hang Seng Index gained 1.2% to 31,495.50.

     FROM THE PRESS: The yuan exchange rate "in the short-term" will not see"

big changes," according to Securities Daily, which cited Huang Yiping, a member

of the PBOC's monetary policy committee. The PBOC's FX policies can be summaries

in three sentences: increase flexibility, allow the market mechanism to serve

its purpose, and keep the yuan relatively stable, the newspaper cited Huang

Huang as saying. Two recent factors are to affect yuan exchange rate: the

expected appreciation of the dollar as the Fed further raises benchmark rate;

and trade current account changes, which could be affected by the progress of

China-U.S. trade friction, Huang said.

     China welcomes Trump's instruction to the U.S. Commerce Department to find

a solution for ZTE to resume its business, Global Times said in a commentary.

China hopes the decision will be implemented quickly and "unconditionally", and

that U.S. won't use it as a bargaining chip, said Global Times. Trump's decision

will ensure ZTE employees do not go out of work, said the paper. China hopes

both countries can treat conflicts regarding trade or cooperation fairly,

without extreme means, said Global Times. 

***Comments: China and U.S. trade conflicts have further deescalated during the

weekend, with Trump tweeting that the U.S. would help ZTE to find "a way to get

back to business." The development was further supported by China Ministry of

Foreign Affairs, which said Monday the country's Vice Premier Liu He will head

to Washington on Tuesday for a five-day visit to discuss trade and economic

issues. 

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

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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