MNI China Daily Summary: Monday, November 20

     TOP NEWS: The yuan's status in the world continues to rise and China's

financial markets continue to open up, People's Daily, a government mouthpiece,

said Monday in a front-page commentary. China has reduced foreign-exchange risks

and made trade and investment more convenient through bilateral currency swaps,

the Renminbi Qualified Foreign Institutional Investor (RQFII) program, outright

monetary transactions, renminbi clearing banks and the Cross-Border Interbank

Payment System. China will stick to further opening up markets, improving the

pricing process for the yuan exchange rate and reducing controls on capital

flow, the newspaper said. "This creates a good financial environment for China's

economic growth," said Zhu Juan, director general of the international

department at the People's Bank of China. (People's Daily)

     TOP NEWS: The People's Bank of China announced on its website Monday

morning that it had injected CNY70 billion in liquidity via seven-day reverse

repos, CNY20 billion via 14-day reverse repos and CNY10 billion via 63-day

reverse repos, with rates unchanged at 2.45%, 2.60% and 2.90%, respectively. The

PBOC did not give further explanations about its operations this morning. This

resulted in a net injection of CNY20 billion for the day, as a total of CNY80

billion in reverse repos matured on Monday.

     POLICY: China's property sales are expected to decline as much as 5% next

year due to the high base this year and a possible slowing of sales in

lower-tiered cities, S&P Global Ratings said Monday. In a webcast gauging the

outlook of the Chinese property sector, the ratings agency said the projected

drop of sales growth could be attributed to the robust sales this year pushing

the base to a high level. S&P said that national property sales rose 10% from

January to October, which was above expectations, but that they fell markedly in

October, with a year-over-year decline of 3.4%, signaling a slowing trend. 

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

at 2.8834%, compared with Friday's average of 2.8805%. The overnight repo

average was at 2.7976%, compared with Friday's 2.7149%.

     YUAN: The yuan fell against the U.S. dollar even though the People's Bank

of China set the fixing rate stronger for the day. The yuan was last at 6.6368

against the U.S. unit after opening at 6.6330, compared with the official

closing price of 6.6353 on Friday. The PBOC set the yuan central parity rate at

6.6271, stronger than Friday's 6.6277. The PBOC has set the fixing stronger for

two straight trading days.

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

3.9600%, compared with the previous close of 3.9400%.

     STOCKS: Stocks were up, led higher by the computer and property management

sectors. The benchmark Shanghai Composite Index closed up 0.28% at 3,392.40.

Hong Kong's Hang Seng Index was 0.12% higher at 29,234.02.

     FROM THE PRESS: China's economic growth is expected to surpass 6.5% in

2018, said Fan Hengshan, deputy secretary-general of the National Development

and Reform Commission, the Shanghai Securities Journal reported Monday. This

year's economic growth, whether in terms of efficiency or structure, is better

than last year and has exceeded expectations, Fan said on Saturday during a

forum in Beijing. If this year's economic growth is more than 6.8% or 6.9%, next

year's gross domestic product growth will be no lower than 6.5%, he argued. He

also said that as China works to transform its growth engine, focusing on

efficiency and structure, its economy will improve in quality and fairness.

(Shanghai Securities Journal)

     China should allow local-government financing vehicles (LGFVs) and

state-owned enterprises controlled by local governments to default under market

forces, which could correctly judge the credit risks of local-government debt,

Ma Jun, former chief economist of the People's Bank of China, told the Shanghai

Securities Journal. Ma, now director of the Tsinghua University Finance and

Development Research Institute, stressed that the process needs to have as its

primary goal the prevention of a systemic financial crisis. The establishment of

property taxes nationwide should be accelerated as a source of income for local

governments, he argued, which would weaken the desire to increase liabilities

and sell land for more income to fund projects. Supervision by local People's

Congresses should be strengthened, with enforced debt quotas and transparency on

balance sheets, Ma said. (Shanghai Securities Journal)

     The State Council has confirmed a plan for a pilot program this year to

transfer 10% of the shares of some state-owned-enterprises (SOEs) to basic

pension funds, the Economic Information Daily, a newspaper under the official

Xinhua News Agency, reported Monday. The plan, announced Saturday, is to use the

money from the shares to fund pensions for SOE workers. The transfers would not

involve listed SOEs and would not create a process to turn SOE shares into cash,

the newspaper said, citing an unidentified Ministry of Finance official. The

plan calls for increasing the pace of the transfers in 2018 and the following

years. (Economic Information Daily)

--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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