MNI China Daily Summary: Monday, September 11

     TOPS NEWS: The People's Bank of China skipped open-market operations

Monday, saying that liquidity in the banking system is relatively high and can

absorb the effect of purchasing government treasuries and maturing reverse

repos. There was a net drain of CNY40 billion for the day, as a total of CNY40

billion in reverse repos matured on Monday. A total of CNY110 billion in reverse

repos matures this week. The CFETS-ICAP money-market-sentiment index ended at 42

on Friday, compared with 41 at Thursday's close. The lower the reading, the

better the liquidity in the interbank market.

     TOP NEWS: A recent rise in the yuan is mainly driven by a weakening of the

U.S. dollar and countercyclical factors, the China Securities Journal reported

Monday, quoting experts. The yuan fixing against the dollar has risen for 10

consecutive trading days -- the longest appreciation streak since the beginning

of 2011, the newspaper said. Some companies have suffered losses as a result of

misjudging the yuan. Some may have lost several hundred million yuan, Mingsheng

Securities research center chairman Guan Qingyou said. The yuan may continue to

strengthen, Guan said. The yuan may be affected by the outlook for the dollar

and the euro, analysts were quoted as saying in the report. In the short term,

the dollar may rebound -- which may lead to a periodical adjustment of the yuan.

But, in the long term, an elimination of one-way depreciation expectations for

the yuan may achieve a "two-way fluctuation," the report said. (China Securities

Journal)

     DATA: China's Consumer Price Index accelerated to 1.8% year-on-year in

August from 1.4% in July. The August rise was stronger than expected, with the

MNI survey median projecting a 1.7% rate. The August rate was the highest since

January's 2.5%. The CPI rose 0.4% m/m last month after a 0.1% drop in July.

     DATA: China's Producer Price Index accelerated sharply to 6.3% year-on-year

in August from the 5.5% rate in July. Like CPI, the PPI increase was stronger

than expected, with the MNI survey median forecasting a 5.7% rate. The August

PPI rate was the highest since April's 6.4%, after stabilizing at 5.5% each of

the previous three months. On a month-on-month basis, the PPI jumped 0.9% in

August compared with the 0.2% gain the month before.

     RATES: Money market rates rose on Monday after the PBOC drained a net CNY40

billion via open-market operations. The seven-day repo average was last at

2.8603%, down from Friday's average of 2.8282%. The overnight repo average was

at 2.6175% compared with Friday's 2.5970%.

     YUAN: The yuan fell against the U.S. dollar Monday after the People's Bank

of China set a stronger daily fixing. The yuan was last at 6.5172 against the

U.S. unit, dropping 0.43% compared with the official closing price of 6.4617 on

Friday. The People's Bank of China set the yuan central parity rate against the

U.S. dollar at 6.4997 Monday, stronger than Friday's 6.5032. The PBOC has set

the fixing stronger for 11 consecutive trading days and today's fixing was the

highest since May 12 last year.

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

3.5777%, down from the previous close of 3.5780%, according to Wind, a financial

data provider.

     STOCKS: Stocks rose, led higher by the ceramics and non-ferrous metals

sectors. The benchmark Shanghai Composite Index closed up 0.33% at 3,376.42.

Hong Kong's Hang Seng Index was 1.03% higher at 27,953.58.

     FROM THE PRESS: Housing prices and sales in Tier-1 cities eased in August,

according to some reports, China News reported Monday. There are worries prices

may rise in September and October -- a peak time for the property market -- but

analysts said the chances of the property sector overheating again were almost

zero. The government is trying to stabilize housing prices, but transactions may

increase slightly. (China News)

     As demand for financing in the real economy rebounds, and bank

balance-sheet business increases because of reductions in off-balance-sheet

business, analysts say credit allocation in August may remain relatively high

and new credit may exceed CNY1 trillion, the Shanghai Securities News reported

Monday. A state-owned big bank source told the newspaper that companies'

short-term financing needs had increased and corporate loans may be the the

busiest sector in August. The source said state-owned-bank credit was

concentrated mainly in national infrastructure -- such as the "One Belt, One

Road" initiative, the Yangtze River Economic Zone and the Xiongan New Area.

(Shanghai Securities News)

     Revenue at China's top 500 companies to date in 2017 has increased but the

return on assets has fallen to a 10-year low, the Economic Information Daily

reported. Total revenue of the top 500 companies surpassed CNY60 trillion for

the first time at CNY64 trillion -- or 7.64% growth compared with last year,

according to a report by the China Enterprise Confederation. Asset scale grew

13.38% y/y to CNY256.13 trillion for a second consecutive yearly increase. But

profit ratio dipped, growing at a relatively low 4.12% to CNY2827.34 billion.

The amount of added profit volume has dipped for three consecutive years, the

report said. Chinese companies aren't equal with their Western counterparts --

who control high-end streams of the international value chain, according to the

confederation. It is hard for Chinese companies to compete with foreign

competitors in motor vehicles, information technology and medicine, it said.

(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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