MNI China Daily Summary: Thursday, August 1

     EXCLUSIVE: A commitment by China's Politburo to concentrate on supply-side

reform and promoting infrastructure development may indicate an increasing

official tolerance for slower growth as well as concerns over the risks from

excessive leverage, policy advisors told MNI. Given that the rate of expansion

of gross domestic product remains towards the lower end of its target range,

monetary policy is likely to retain its neutral-tilting neutral stance and any

additional fiscal measures will probably target support of the infrastructure

sector, said Yu Yongding, a former member of the central bank's monetary policy

committee.

     TRADE: The U.S. should be ready to properly address China's core trade

concerns, Gao Feng, spokesman for the Ministry of Commerce told journalists,

urging Washington to work with Beijing on reaching an agreement. Negotiators

discussed why earlier talks fell apart and clarified their thoughts on economic

and trade issues during the latest round in Shanghai, according to Gao. They

also confirmed the principles, methods and timetable for the next round, said

Gao.

     DATA: The Caixin China Manufacturing Purchasing Managers Index (PMI) rose

to 49.9 in July from June's 49.4, in contractionary territory below the

breakeven 50 for a second consecutive month. The improvement was mainly driven

up by a pick-up in production, according to Caixin. New orders, which indicate

future activity levels, saw a slight expansion, helped by improved domestic

demand. New export orders did not improve, as some manufacturers surveyed said

the ongoing trade disputes continue to pressure sales.

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

(OMOs) for an eighth day, leaving liquidity unchanged, according to Wind

Information. Liquidity in the banking system is reasonable and ample, the PBOC

said.

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

institutions (DR007) fell to 2.5878% from Wednesday's close of 2.6944%, Wind

Information showed. The overnight repo average decreased to 2.6329% from

Wednesday's 2.6568%.

     YUAN: The yuan weakened to 6.9023 against the dollar from Wednesday's close

of 6.8855. The PBOC set the dollar-yuan central parity rate higher at 6.8938

today, compared with 6.8841 on Wednesday.

     BONDS: The yield on 10-year China Government Bond was last at 3.1430%, down

from the close of 3.1560% on Wednesday, according to Wind Information.

     STOCKS: The benchmark Shanghai Composite Index fell 0.81% to 2,908.77. Hong

Kong's Hang Seng Index decreased 0.76% to 27,565.70.

     FROM THE PRESS: The latest China-U.S. trade talks were "frank, efficient

and constructive, and has taken an important step as the beginning of a new

process," Foreign Minister Wang Yi said, according to a report by Xinhua News

Agency. Wang believed a win-win deal was possible providing talks continue in a

state of equality and the legitimate concerns of both parties are addressed,

according to the official agency.

     The PBOC raised the available loan amount for small and medium-sized banks

to expand credit supply to small/micro enterprises and private enterprises by by

CNY50 billion, it said in a statement late Wednesday. Outstanding loans for

small and medium banks totalled a record at CNY226.7 bln at the end of June, the

PBOC said. The action is seen as another measure of easier structural monetary

policy, which should continues in a "prudent" tone in the near future, the

Securities Times reported Thursday.

     The China Banking and Insurance Regulatory Commission (CBIRC) will continue

using best practices to oversee illegal property market investments, the

Economic Information Daily said, noting the regulator will also continue

ensuring prudent issuance of development loans and personal mortgages to promote

a stable property market.

     China local governments bond issuance cooled in July to CNY555.9 billion,

down 38% from CNY899.6 billion, according to Wind. The total local government

bonds issued YTD is CNY2.39 trillion, or 77.5% of the whole year target, the

21st Century Herald reported.

--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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