MNI China Daily Summary: Monday, September 18

     TOP NEWS: Housing prices further cooled across the country in August as

government controls on the property sector continued to bite and new curbs on

lower-tiered cities started taking effect. Out of the 70 major Chinese cities

the NBS monitors, 68 cities saw new home prices rise on a yearly basis in

August, compared with 70 cities in July, while prices in two cities fell. On a

monthly basis, housing prices rose in 46 cities, 10 fewer than in July, while 18

cities experienced housing price drops, compared with nine in July. The growth

rate of new home prices decelerated in 53 cities m/m in August, compared with 46

cities in July, while it accelerated in 15 cities, compared with 24 in July.

Compared with the same period a year ago, new home prices in 49 cities

decelerated, more than the 31 in July, while they accelerated in 19 cities, much

less than the 37 in July.

     LIQUIDITY: The People's Bank of China injected CNY280 billion in seven-day

reverse repos and CNY20 billion in 28-day reverse repos via open-market

operations. This resulted in a net injection of CNY300 billion at OMOs for the

day, as no reverse repos matured. CNY113.5 billion in Medium-term Lending

Facility instruments matured for the day, which means the central bank injected

a net CNY186.5 billion. The PBOC injected a total of CNY260 billion at OMOs last

week. A total of CHY210 reverse repos matures this week. The CFETS-ICAP

money-market sentiment index ended at 47 Friday, up from 45 at Thursday's close.

The lower the reading, the better liquidity in the interbank market.

     RATES: Money market rates rose as banks paid taxes and set aside reserve

requirements. The seven-day repo average was last at 2.9222% on Monday, higher

than Friday's average of 2.9079%. The overnight repo average was at 2.7930%,

also higher than Friday's 2.7133%.

     RATES: The Ministry of Finance sold CNY36 billion in five-year special

treasury bonds at a yield of 3.59% in an auction on Monday.

     YUAN: China's weekly Renminbi Index versus 24 trade-weighted currencies was

published Monday by the China Foreign Exchange Trading System -- the central

bank unit that runs the country's interbank market. The index fell 0.32% to

94.86 last week after a 0.78% increase the previous week. As of Sept. 11, the

yuan had appreciated 0.03% against the 24-currency basket since Dec. 30,

according to MNI calculations.

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

of China set a stronger daily fixing. The yuan was last at 6.5562 against the

U.S. unit, compared with the official closing price of 6.5442 on Friday. The

PBOC set the yuan central parity rate against the U.S. dollar at 6.5419 on

Monday, slightly stronger than Friday's 6.5423.

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

3.5936%, up from the previous close of 3.5813%, according to Wind, a financial

data provider.

     STOCKS: Stocks were up, led higher by shares of securities companies. The

benchmark Shanghai Composite Index was last up 0.28% at 3,362.86. Hong Kong's

Hang Seng Index was 1.16% higher at 28,129.59.

     FROM THE PRESS: Regulators are cracking down on "virtual currencies,"

including Bitcoin, because of related risks and their potential to jeopardize

the real economy, Xinhua News Agency reported Sunday. As of Friday all three

large bitcoin exchanges in China -- Bitcoin China, OKcoin and Huobi -- said they

would shut before Sept. 30, the report said. As bitcoin prices rise, the risk of

speculation and unrestricted capital flows have distorted the initial intentions

of economic innovation, the report said. Restrictions indicate a determination

by authorities to prevent financial risks, the report said. (Xinhua News Agency)

     GDP growth in 2017 will reach 6.8% -- above the 6.5% target set earlier

this year -- but the fourth quarter will see a slowing, the Economic Information

Daily reported Monday. China's economic performance in August was below

estimates as industrial output, fixed-asset investment and exports all rose at a

slower pace. However, positive momentum hasn't changed, the report said. Three

main factors will continue to boost the economy -- increasing investment in

property, recovering manufacturing and robust consumption. As the property

market cools and infrastructure investment decelerates, growth in the fourth

quarter will be lower, the report said. (Economic Information Daily)

     It is difficult to see a reserve-requirement-ratio cut implemented because

current monetary policy is showing an obvious tightening bias, the Securities

Times said in a commentary Monday. M2 growth will remain low at 9% to 10%

because strict financial regulations targeting leveraging and financial bubbles

will further curb expansion in the sector, the commentary said. An RRR cut is a

strong signal of a loose monetary policy. Therefore it is unlikely to be adopted

now -- considering financial regulation targets haven't changed, the economy

continues to be stable and the most important advanced economies have all

tightened policy, the report said. (Securities Times)

     United Nations actions against North Korea must be implemented

comprehensively and completely but sanctions aren't the only solution, Su

Xiaohui, deputy director for the Department of International and Strategic

Studies at the China Institute of International Studies, which is run by the

Foreign Affairs Ministry, said in the People's Daily on Monday. Nuclear tensions

on the Korean Peninsula are a reflection of conflicts between North Korea and

the United States, Su said. The U.S's obsession with imposing sanctions on North

Korea and even military threats have hindered peaceful dialogue and other joint

efforts, she said. China won't support North Korea's development of nuclear

weapons but also says the U.S., Japan and South Korea shouldn't destabilize the

situation, Su said. China suggests the U.S. not link Sino-U.S. trade with North

Korea issues, Su added. (People's Daily)

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

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

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