MNI China Daily Summary: Thursday, August 24

     TOP NEWS: The People's Bank of China said Thursday that it had made CNY80

billion in treasury cash deposits to commercial banks and that liquidity in the

interbank market was at a proper level, so there was no need to conduct

open-market operations for the day. A total of CNY100 billion in reverse repos

matured on Thursday, resulting in a CNY20 billion drain after taking into

account the treasury cash deposits. It was the fourth consecutive day this week

that the PBOC has drained liquidity from the interbank market.

     DATA: Excavator sales by Chinese construction machinery makers surged

101.3% on a year-on-year basis in the January-July period, with total sales of

82,725 units in the period higher than the 70,320 units sold in the whole of

2016, the China Daily reported on Thursday, citing statistics from the China

Construction Machinery Association. The report said excavator sales for the year

are expected to total 120,000. Out of the 82,725 units sold so far this year,

77,814 of the sales were domestic, while 4,884 excavators were sold overseas,

the report said. The report quoted Yin Xiaoli, the deputy secretary general of

the CCCMA, as saying that the robust growth was due to China's ongoing rail,

highway and airport projects in smaller cities, as well as its "One Belt, One

Road" infrastructure initiative along ancient trading routes.

     RATES: The PBOC and the Ministry of Finance on Thursday deposited CNY80

billion in treasury cash for three months at several commercial banks at a rate

of 4.51%, the highest since March 19, 2015, and also higher than the 4.46% rate

at the previous similar auction.

     RATES: Money market rates were mixed. The seven-day repo average was last

at 2.9120%, slightly higher than Wednesday's average of 2.9104%. The overnight

repo average was at 2.8570%, lower than Wednesday's 2.8711%.

     YUAN: The yuan was slightly stronger against the U.S. dollar after the

People's Bank of China set the fixing rate stronger for the day. The yuan was

last at 6.6634 against the U.S. unit, compared with the official closing price

of 6.6636 on Wednesday. The PBOC set the yuan central parity rate at 6.6525,

0.16% stronger than Tuesday's 6.6633.

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

3.6047%, compared with the previous close of 3.5906%.

     STOCKS: Stocks fell, with the ceramics and medical instruments sectors

leading losses. The benchmark Shanghai Composite Index closed down 0.49% at

3,271.51. Hong Kong's Hang Seng Index was 0.42% higher at 27515.85. 

     FROM THE PRESS: Industrial and Commercial Bank of China (ICBC), the

country's largest bank by assets, will increase control of its interbank

transactions and improve its credit risk prevention policies, the Shanghai

Securities News reported Thursday, citing Yi Huiman, the bank's chairman. ICBC

pledges that outstanding interbank assets will not surpass 10% of total

liabilities, Yi said, and its leverage ratio from wealth management products

will not exceed 1.4 times. The bank will focus on credit management and improve

its capacity for absorbing and resolving risks. ICBC is committed to operating

in a prudent way, maintaining stability in liquidity, the yuan exchange rate and

interest rates, and playing a positive role in guiding market expectations and

reducing volatility, Yi stressed. (Shanghai Securities News)

     The overhaul of state-owned enterprises run by the central government will

accelerate and strengthen the government's deleveraging campaign, Premier Li

Keqiang said Wednesday in an executive meeting of the State Council, according

to the government's website. These SOEs are encouraged to concentrate on mergers

and reorganization, Li said, and the government will take measures to deal with

"zombie companies" and excess production capacity in the coal and steel sectors.

The reduction of SOEs' debt-to-asset ratios is the government's top priority, Li

stressed. The State Council meeting also discussed the need to expand

market-oriented debt-for-equity swaps as part of SOE reforms.

     Issuance of negotiable certificates of deposit (NCDs) contracted sharply in

August because of tightened regulation, the Economic Information Daily reported

Thursday. As of Aug. 21, total issuance of NCDs stood at CNY1.09 trillion, down

from CNY2 trillion in June and CNY1.5 trillion in July. Last week, issuance was

less than maturing NCDs for the first time since July, resulting in a negative

net funding volume of CNY42.13 billion, the newspaper said. The increase in

money market rates resulting from the government's deleveraging campaign was the

main reason for the contraction, the report argued. Regulators are expected to

consider rules for money market funds that would limit their ability to buy NCDs

issued by low-rated institutions, which would further reduce NCD issuance, the

report said. (Economic Information Daily)

     China will continue to scrutinize the authenticity and compliance of

outbound direct investment (ODI) while promoting legal investment, Caixin, a

prominent financial magazine, reported Thursday, citing Guo Song, director of

the Capital Account Management Department of the State Administration of Foreign

Exchange. Any rapid expansion of ODI could easily trigger risks with foreign

exchange, push up prices of foreign assets and worsen capital outflows, Guo

said. Regulators have noticed that some companies have transferred capital in

the name of ODI but instead invested illegally in foreign equity markets.

Regulators will support overseas mergers and acquisitions in a market-oriented

way, following the guidelines of the "Going Out" strategy and the "One Belt, One

Road" initiative, Guo said. (Caixin Magazine)

--MNI Beijing Bureau; +86 10 85325998; email: he.wei@marketnews.com

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

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