MNI China Daily Summary: Friday, September 18

POLICY: China and the E.U. have made a "major breakthrough" on the issue of fair competition during the latest negotiations over a bilateral investment deal and talks starting next week will focus on issues of market access and text of the deal, said Gao Feng, spokesman of China's Ministry of Commerce.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY110 billion via 7-day reverse repos and CNY60 billion via 14-day reverse repos on Friday, injecting net CNY30 billion due to the maturity of CNY90 billion reverse repos and CNY50 in deposits of central treasury cash at commercial banks, according to Wind Information. The rate for 7-day reverse repos and 14-day reverse repos remained unchanged at 2.2% and 2.35% accordingly.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 2.2770% from Thursday's close of 2.2047%, Wind Information showed. The overnight repo average rose to 2.1246% from the previous 1.7920%.

YUAN: The currency strengthened to 6.7588 against the dollar from 6.7659 on Thursday. The PBOC set the dollar-yuan central parity rate lower at 6.7591, compared with Thursday's 6.7675.

BONDS: The yield on 10-year China Government Bond was last at 3.1125%, down from the close of 3.1300% on Thusday, according to Wind Information.

STOCKS: The Shanghai Composite Index gained 2.07% to 3338.09, while the CSI300 index increased 2.25% to 4,737.09 as financial companies led the surge for today. Hang Seng Index rose 0.47% to 24,455.41.

FROM THE PRESS: The yuan's recent surge may attract capital inflows and encourage speculative trading which can hurt industry development and economic growth in the long term, the 21st Century Business Herald commented. The healthy growth of the manufacturing industry depends on stable exchange rates and costs, while excess liquidity and capital inflow create inflation risks and fan asset prices, wrote the newspaper. Policymakers should beware of a stronger yuan's impact on the competitiveness of Chinese goods given that businesses already face rising raw material costs, the newspaper said.

China's economic growth is likely to strengthen further in Q4 due to fast-recovering supply chains, growing consumption and investment, as business profits and government revenues further improve, the China Securities Journal reported on Friday citing Liu Yuanchun, the vice president of the Renmin University of China. Q4 investments in infrastructure projects, real estate, and exports are set to grow from a year ago, the paper reported citing Teng Tai, the head of the WANB Research Institute. China should continue to create job opportunities, improve wage incomes, and draw in high-quality services and products to improve domestic consumption, the newspaper said citing Yu Chunhai, the dean of RUC's School of Economics.

China will support the reform of both state and private enterprises to further boost the domestic economy, the People's Daily reported citing a weekly meeting chaired by Premier Li Keqiang. China will improve the core competence, management systems and innovation of SOEs to further their role in supporting the domestic economy, said Li. China will also provide a fair and open environment for private businesses to help create jobs and widen their access to previously restricted sectors including the power grid and railways, Li said.