MNI China Daily Summary: Monday, September 25

     TOPS NEWS: The U.S. should obey World Trade Organization rules and "be

cautious about using trade restriction measures," the head of the Chinese

Commerce Ministry's trade remedy and investigation bureau, Wang Hejun, warned in

a statement Saturday. He gave the warning in response to the U.S. International

Trade Commission's ruling on Friday that solar panel imports, including those

from China, had hurt two American companies, Suniva and SolarWorld Americas.

Wang stressed that the USITC's ruling "not only adds uncertainties to the normal

international trade order of solar products, but it's also useless for the

overall healthy and balanced development of the U.S. solar industry." U.S.

President Donald Trump must now decide based on the USITC finding whether or not

to impose tariffs on imported solar panels. Trump is expected to visit China in

November.

     POLICY: The Chinese government should allow "selected" defaults on bonds

issued by local government financing vehicles (LGFVs) to promote better scrutiny

and prices by financial markets, Fitch Ratings said in a report Monday. The

first defaults of LGFV bonds are becoming more likely, which could trigger a

re-pricing of LGFV debt by the market, Fitch Ratings predicted. However,

widespread LGFV defaults are unlikely, given the government is seen having

sufficient tools to avoid contagion to the broader LGFV market, Fitch said.

     DATA: China's automobile sales this year may increase by 5% from 2016 to

29.4 million, according to a speech last week by Shi Jianhua, deputy secretary

general of the China Association of Automobile Manufacturers. Production and

sales in the first eight months rose 4.7% and 4.3%, respectively, from a year

ago, led by double-digit gains by SUVs, a sector now dominated by China's local

brands, according to a transcript of the speech posted on the auto group's

website. Demand for automobiles is being fueled by replacement purchases in

top-tiered cities and increasing purchases in third- and fourth-tiered cities,

Shi said.

     RATES: Money market rates were higher on Monday after the PBOC drained a

net CNY80 billion via open-market operations. The seven-day repo average was

last at 3.0508%, compared with Friday's average of 2.9533%. The overnight repo

average was at 2.7638%, compared with Friday's 2.7482%.

     YUAN: The yuan fell against the U.S. dollar Monday morning after the

People's Bank of China set a weaker daily fixing. The yuan was last at 6.6127

against the U.S. unit, dropping 0.36% compared with the official closing price

of 6.5922 on Friday. The People's Bank of China set the yuan central parity rate

against the U.S. dollar at 6.5945 Monday, modestly weaker than Friday's 6.5861.

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

3.6129%, up from the previous close of 3.5821%, according to Wind, a financial

data provider.

     STOCKS: Stocks were down, led lower by the property agency and property

development sectors. The benchmark Shanghai Composite Index closed 0.33% lower

at 3,341.55. Hong Kong's Hang Seng Index was 1.20% lower at 27,546.19. 

     FROM THE PRESS: U.S. Trade Representative Robert Lighthizer's accusation

that China has broken trade rules is not accurate and instead shows a trend in

the U.S. toward trying to shift attention from its domestic problems to external

issues, creating a real threat to the international trade system, the official

People's Daily said in a report Monday. The newspaper stressed that China is not

the one violating trade rules, citing analysts saying Lighthizer's accusations

were inappropriate. China and the U.S. should continue to focus on trade

cooperation to achieve a win-win situation, analysts were quoted as saying.

(People's Daily)

     Foreign investors have had greater access to China's market in the

country's northeastern rust belt as that region struggles to revitalize its

economy, the South China Morning Post reported Sunday, citing Agence

France-Presse. Foreign companies feel more welcome in Liaoning, the only

province in China that was officially in recession in 2016, posting a 2.5%

contraction of GDP. The province has also admitted that it had faked GDP growth

data from 2011 to 2014, especially in Shenyang, the capital city. The local

government has eased company registration procedures, given three-year visas to

family members of staffers working for foreign firms, and provided rental

discounts for factory and office space, the report said. The report cited the EU

Chamber of Commerce saying businesses in renewable energy, tourism, agriculture

and advanced technology were well positioned to succeed in Shenyang. (Agence

France-Presse)

     The U.S. Federal Reserve's shrinking of its balance sheet may not have much

of a short-term negative impact on the Chinese economy, but the long-term risks

"may not be small," the Economic Information Daily said in a front-page

commentary Monday. In the short term, the Fed's action won't be a great shock to

the Chinese economy, as the process will be gradual and China can manage the

impact on cross-border capital flows and the yuan exchange rate, the report

said. The U.S. economic structure has not improved significantly since the 2008

financial crisis, and the room for the global economy to strengthen is not

large, so China's growth has played a key role in driving global growth, the

commentary said. But China's growth could slow down as policy controls on the

property sector increasingly tighten and production prices increase, the

newspaper said. China's growth momentum could slow down in 2018 and 2019 and

thus weaken the global economy's ability to battle against risks caused by the

Fed balance sheet cut, 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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