MNI China Daily Summary: Monday, November 19

     TOP NEWS: China's recent bailout plan for private sector firms facing

financing difficulties will not solve the issue longer-term, as loan rates are

dictated by policy, Huang Yiping, a senior fellow at China Finance 40 Forum said

in Beijing Saturday. Without some flexibility in rates, the plan will not

encourage bank lending to private companies, said Huang, a former member of the

People's Bank of China (PBOC) monetary policy committee.

     TRADE WAR: Fundamental disagreements over issues other than trade may

prevent an upcoming presidential summit between the U.S. and China from

resolving bilateral trade tensions, a former senior Chinese negotiator warned

Sunday, speaking to a Beijing forum. If the two sides squabble over "underlying

problems" such as technological competition and differences in economic systems,

trade frictions will be further mired into political conflicts, said Long

Yongtu, a former vice minister of Foreign Trade and Economic Cooperation.

     POLICY: China should be conservative in its management of fiscal spending

and shun large infrastructure investments just for the sake of stimulating

growth, a former Minister of Finance said Sunday. Both central and local

governments are overburdened with debt and increasing spending on social

securities will see them take on more, said Lou Jiwei, now chairman of the

National Council for the Social Security Fund. Boosting leverage only adds to

future risks as the country grapples with structural reform, he said at a

Beijing forum.

     LIQUIDITY: The PBOC skipped open market operations (OMOs) on Monday,

leaving liquidity unchanged, as no reverse repos mature, according to Wind

Information. The central bank said liquidity in the banking system is at a

reasonable and ample level.

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

institutions (DR007) increased to 2.6327% from Friday's close of 2.6024%, Wind

Information showed. The overnight repo average increased to 2.5529% from

Friday's 2.3400%.

     YUAN: The yuan appreciated to 6.9433 against the U.S. dollar from Friday's

close of 6.9474. The PBOC set the dollar/yuan central parity rate stronger for a

fourth day at 6.9245 Monday, compared with last Friday's 6.9377.

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

3.3900%, up from the closing price of 3.3450% on Friday, according to Wind

Information.

     STOCKS: The benchmark Shanghai Composite Index closed 0.91% higher at

2,703.51. Hong Kong's Hang Seng Index increased 0.72% to 26,372.00.

     FROM THE PRESS: China will likely cut the reserve requirement ratio (RRR)

by around 1pp in January, the China Securities Journal reported Monday, citing

Pan Xiangdong, chief economist at New Times Securities. Before then, the central

bank will probably use other tools, such as refinancing, rediscounting, PSL, MLF

and OMO to ease liquidity conditions over the remainder of the year, the Journal

said, citing Pan.

     Fujian's provincial government has set up a CNY15 billion bailout fund,

alongside CNY2 billion in special bonds, in order to help promising private

sector companies which are experiencing financing difficulties owing to their

exposure to "share pledge" risks, Xinhua reported Sunday. The provincial

government has also pledged to develop equity financing, accelerate the

establishment of SME development funds, and encourage various industrial

investment and private equity funds to invest in high-quality private sector

enterprises, the report said. (Link to the story: https://bit.ly/2DMngh8)

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

--MNI London Bureau; +44 207-862-7489; email: ukeditorial@marketnews.com

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