MNI China Daily Summary: Monday, October 22

     TOP NEWS: China may implement tax cuts as part of a range of measures

designed to bolster confidence in the economy, which has been hit by recent

stock market declines, according to Ma Jun, a PBOC policy adviser and former

chief economist at the central bank. The government may cut taxes and

administrative fees by more than 1% of GDP next year, Ma said in a press

statement, a copy of which was received by MNI. The tax cuts could be larger

than those implemented by the Trump administration in the U.S., Ma stated.

     LIQUIDITY: The PBOC injected CNY120 billion of seven-day reverse repos on

Monday. The move resulted in a net liquidity injection of CNY120 billion as no

reverse repos mature today, according to Wind Information. The 7-day weighted

average interbank repo average rate for depository institutions (DR007)

increased to 2.6185% from Friday's close of 2.6081%, Wind Information reported.

The overnight repo average increased to 2.4680% from Friday's 2.4253%.

     YUAN: The yuan depreciated to 6.9356 against the U.S. dollar from Friday's

close of 6.9321. The PBOC set the yuan central parity rate at 6.9236 on Monday,

a stronger fixing following two consecutive weaker fixings at the end of last

week.

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

3.5950%, up from 3.5750% on Friday, according to Wind Information.

     STOCKS: The benchmark Shanghai Composite Index closed 4.09% higher at

2654.88. Hong Kong's Hang Seng Index increased 2.43% to 26182.73.

     FROM THE PRESS: Encouraging long-term funds to enter the market, promoting

the reform of state-owned enterprises, and implementing measures to further open

up the economy are some of the crucial policy steps which need to be taken to

improve China's financial resilience, policymakers agreed at a meeting of the

State Council's Financial Stability and Development Committee, according to an

official announcement. Implementing a sound and neutral monetary policy,

enhancing the vitality of SMEs and strengthening the role of capital markets,

are also vital measures, the announcement said. (Link to the story:

https://tinyurl.com/y7us4stt)

     Robust capital inflows are a sign of continued investor confidence in

China, the People's Daily said in an opinion piece published Monday. During

January-September, foreign investors purchased more than CNY230 billion worth of

A-shares, according to an official at the China Securities Regulatory

Commission. The proportion of foreign shareholdings is comparable to that of

insurance funds, making them a force to be reckoned with, the Daily said. In the

first eight months of the year, foreign investors established 41,131 companies

in China, an increase of 102.7% y/y, investing a total $86.5 billion. According

to the latest UNCTAD report, China was the largest recipient of foreign direct

investment globally during H1 2018, the Daily noted. (Link to the story:

https://bit.ly/2q31Tzx)

     Underlying inflationary pressures in China's economy remain subdued, and

annual CPI growth is unlikely to exceed 3%, the People's Daily Overseas Edition

said Monday, downplaying concerns of higher inflation after September's CPI

print hit a seven-month high. Short-term seasonal factors, including

weather-related effects, have driven the recent spike in inflation, the Daily

pointed out, citing Zhao Xijun, associate dean of the School of Finance at the

Renmin University of China. (Link to the story: https://bit.ly/2NXAA2W).

--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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