MNI China Daily Summary: Monday, September 2

     DATA: The Caixin China manufacturing PMI rose to 50.4 in August from July's

49.9, bouncing back into the expansionary zone above the breakeven 50 and

hitting the highest level since April. The improvement was driven by the

recovery in production, according to Caixin. The production sub-index rose to a

five-month high, which signals improving demand. New export orders, an indicator

of external demand, fell to the lowest since December 2018, remaining in

contractionary territory for the third consecutive month.

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

(OMOs), leaving liquidity unchanged as no reverse repos matured, according to

Wind Information. The liquidity in the banking system is at a relatively high

level, enough to offset the issuance of local government bonds, the PBOC said.

     RATES: The 7-day weighted average interbank repo rate for depository

institutions (DR007) fell to 2.6325% from Friday's close of 2.6690%, Wind

Information showed. The overnight repo average decreased to 2.5466% from

Friday's 2.5733%.

     YUAN: The yuan closed at 7.1716 against the U.S. dollar from Friday's close

of 7.1452. The PBOC set the dollar-yuan central parity rate higher at 7.0883,

compared with 7.0879 on Friday.

     BONDS: The yield on the 10-year China Government Bond was last at 3.0650%,

up from Friday's close of 3.0550%, according to Wind Information.

     STOCKS: The benchmark Shanghai Composite Index rose 1.31% to 2,924.11. Hong

Kong's Hang Seng Index decreased 0.38% to 25,626.55.

     FROM THE PRESS: The new wave of tariffs is at a turning point in the

China-U.S. trade war because Washington's response will be more rational as it

understands the pain inflicted on American businesses and consumers, according

to an editorial in the Global Times. The U.S. policy was damaging its economy in

an attempt to make China surrender on trade issues, but Washington had

underestimated China's resilience, the newspaper said.

     China will strengthen capital market reforms to attract more long-term

funds to the Chinese market, according to a statement on the government website

summarizing a meeting by the Financial Stability and Development Committee under

the State Council. China will increase the counter-cyclical adjustment of

macroeconomic policies and make greater efforts to improve the transmission of

monetary policy, and it will also better integrate fiscal policy with monetary

and financial policies, the statement said.

     The slowdown in the global economy and expectations of monetary easing by

central banks are providing support for gold at the US$1500 per ounce level,

according to the China Securities Journal. The newspaper says the strong U.S.

dollar and U.S. stocks are also affecting the upward movement of gold and

silver, and that the future trend is dependent on interest rate cuts by the U.S.

Federal Reserve.

--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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