MNI China Daily Summary: Monday, September 30

     TRADE: Chinese Vice Premier Liu He will head to Washington D.C. in the

second week of October for the 13th round of high-level trade negotiations, Vice

Minister of Commerce Wang Shouwen said at a press conference on Sunday in

Beijing. The trip follows a recent "constructive" vice-ministerial talk, said

Wang, who gave the information when asked to confirm if the meeting was to take

place on Oct 10. Wang didn't give an exact date of Liu's departure. "The two

sides should seek a solution through equal dialogues," Wang said little beyond

repeating the official line.

     DATA: China's Purchasing Manager Index (PMI) edged up to 49.8 in September

from 49.5 in August on expanding production and demand, the National Bureau of

Statistics said. The index remained below 50 for the fifth month.

     DATA: Caixin China manufacturing PMI for small and medium Chinese

manufacturers rose for the third month to 51.4 in September from 50.4 in August,

the highest since March 2018, driven by a "robust" recovery in production and

domestic demand, according to publisher Caixin. New-export-order sub-index

remained below 50 while new-order was the highest in 18 months, Caixin said.

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

(OMOs), net-draining CNY20 billion after the maturity of reverse repo, according

to Wind Information. The total liquidity in the banking system is relatively

high, due to increased fiscal spending at the end of the quarter, the PBOC said.

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

institutions (DR007) increased to 2.8500% from Sunday's close of 2.7470%, data

by Wind Information showed. The overnight repo average rose to 2.6532% from

Sunday's 1.2334%. 

     YUAN: The yuan weakened to 7.1381 against the U.S. dollar from Friday's

close of 7.1195. The PBOC set the dollar-yuan central parity rate stronger at

7.0729, compared with 7.0731 on Friday.

     BONDS: The yield on 10-year China Government Bonds was last at 3.1450%, up

from Sunday's close of 3.1400%, according to Wind Information. 

     STOCKS: The Shanghai Composite Index decreased 0.92% to 2,905.19. Hong

Kong's Hang Seng Index edged up 0.53% to 26,092.27.

     FROM THE PRESS: China should boost consumption to ease downward economic

pressure and balance external uncertainty with a stronger domestic market, the

Economic Information Daily said in a commentary. China's policy should focus on

promoting rural, 'green' and service consumption, as well as encouraging the

replacement of used automobiles, home appliances and electronic consumer goods,

the newspaper said.

     The PBOC will use market-based reforms to significantly lower the level of

actual interest rates, the PBOC-run newspaper Financial News reported citing

unidentified observers. The Q3 meeting of the PBOC's monetary policy committee

signaled the use of the new loan prime rate (LPR) pricing mechanism, it said.

The one-year LPR rate declined by 0.5 pp because banks' borrowing costs were

lower due to the reserve requirement ratio cut. In the longer term, keeping the

five-year LPR rate unchanged could avoid stimulating the real estate sector, the

newspaper said.

     China should deepen supply-side reform, implement prudential monetary

policy, conduct countercyclical adjustment and grow social financing, the

Securities Daily said reporting on a meeting of the Financial Stability and

Development Committee. China should also accelerate the creation of a long-term

mechanism for commercial banks to replenish capital and better channel liquidity

to the real economy, it said.

--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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