MNI China Daily Summary: Monday, November 25

     EXCLUSIVE: China will accelerate efforts to recapitalise small and

medium-sized banks to calm fears over risks in the sector and boost lending to a

softening economy, policy advisors and banking sources told MNI. Officials are

encouraging SMBs to boost capital, via perpetual bonds or preferred shares, or

by stake sales to strategic investors or in IPOs, said Zeng Gang, deputy

director of the National Institution for Finance and Development, a Chinese

Academy of Social Sciences think tank. A lack of safe assets means SMBs should

find demand for perpetual bonds, Zeng said, adding that IPO approvals have also

been speeded up.

     TRADE: China has stepped up protection of intellectual property rights

under a guideline issued by the general offices of the Communist Party of China

Central Committee and the State Council, Xinhua News Agency reported on Sunday.

The guideline calls for speeding up the introduction of a punitive compensation

system for infringements of patents and copyrights, and strengthening the

protection of trade secrets and confidential business information, Xinhua said.

     LIQUIDITY: The People's Bank of China (PBOC) skipped open market operations

for the fourth day, draining CNY180 billion through maturing reverse repos,

according to Wind Information. Increased fiscal spending by month-end offset the

maturity of reverse repos, leaving liquidity reasonable and ample, PBOC said.

Also, CNY60 billion of Treasury's cash deposits at commercial banks matured

today, Wind Information said.

     RATES: The seven-day weighted average interbank repo rate for depository

institutions (DR007) increased to 2.5252% from Friday's close of 2.4194%, Wind

Information showed. The overnight repo average rose to 2.2206% from Friday's

1.9462%.

     YUAN: The yuan strengthened to 7.0320 against the U.S. dollar from Friday's

close of 7.0356. PBOC set the dollar-yuan central parity rate higher at 7.0306,

compared with Friday's 7.0306.

     BONDS: The yield on 10-year China Government Bond was last at 3.1950%, up

from Friday's close of 3.1675%, according to Wind Information. 

     STOCKS: The Shanghai Composite Index gained 0.72% to 2,906.17, boosted by

positive signals about a potential China-U.S. trade deal following the two heads

of state had expressed willingness to strike a deal on Friday. Hang Seng Index

rallied 1.50% to 26,993.04. 

     FROM THE PRESS: China's economy does not need Quantitative Easing (QE) and

issues faced by Chinese companies cannot be solved by QE, according to an op-ed

published in the PBOC-run newspaper Financial News. China should step up

countercyclical measures including expansionary fiscal policies and structural

monetary measures to stabilize the economy in the short-term, the newspaper

said. The monetary base is sufficient, but credit creation needs to improve

because borrowing costs for small and private companies are still high, the

newspaper added.

     The PBOC is expected to inject more liquidity in December to avoid a

possible liquidity crunch that can offset earlier policy rate cuts, the China

Securities Journal reported citing analysts. The PBOC may use medium-term

lending facility (MLF), pledge supplementary lending (PSL), or restart injecting

14- and 28-day reverse repos, as banks need more capital to meet yearend

regulatory guidelines, the journal said.

     The China Banking and Insurance Regulatory Commission (CBIRC) will

strengthen countercyclical adjustments, improve financial institutions' due

diligence and lending to the real economy, the Shanghai Securities Journal

reported citing the commission's Vice Chairman Liang Tao. China can maintain the

stability of its financial system with room for policy adjustments, the

newspaper cited Liang as saying.

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

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

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