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MNI China Daily Summary: Wednesday, October 28

(MNI) LONDON

LIQUIDITY: Liquidity was little changed across China's interbank markets in October although they were tighter at the medium-and-longer end of the curve, the latest MNI Liquidity Conditions Index shows. The Liquidity Condition Index picked up to 78.1 in October from September's 75.0, with 62.5% respondents reporting tighter condition on the back of increased bond issuance and tax payments.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY120 billion via 7-day reverse repos with the rate unchanged. This resulted in a net injection of CNY40 billion after the maturity of CNY80 billion of reverse repos, according to Wind Information. The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 2.5312% from Tuesday's close of 2.5270%, Wind Information showed. The overnight repo average fell to 2.3980% from the previous 2.4215%.

YUAN: The currency strengthened to 6.7138 against the dollar from 6.7157 on Tuesday. The PBOC set the dollar-yuan central parity rate higher for a forth trading day at 6.7195, compared with the 6.6989 set on Tuesday.

BONDS: The yield on 10-year China Government Bond was last at 3.1750%, up from Tuesday's 3.1500%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.46% to 3,269.24, while the CSI300 index increased 0.81% to 4,737.27. Hang Seng Index lost 0.32% to 24,708.80.

FROM THE PRESS: China has gradually eased the use of countercyclical factors in some of its recent daily fixing against the dollar to increase transparency and efficiency and allow the market a bigger role, the Economic Information Daily reported citing the Secretariat of the China Foreign Exchange Self-Regulatory Mechanism. The move has corresponded to the recent gains in corporate settlement and decreases in sales exchange rates and wider foreign exchange movements, the Daily cited Wang Youxin, a researcher from the BOC Research Institute. The yuan should remain strong given current economic fundamentals and China's interest spreads against those of other nations, but uncertainties exist in Q4 given a possible second recession and financial market volatilities in Europe and America, and the unknown regulatory intentions of Chinese regulators, Wang said.

China is likely to de-emphasise the GDP growth rate while mapping out its 14th Five-year Plan and pursue the "dual circulation" model as it continues to open up the economy, Yicai reported. China will focus more on economic balance and high quality development rather than a specific GDP growth goal, the newspaper said citing Wang Tao, an economist from UBS Securities. China's future GDP increase should rely more on domestic demand and consumption potential, YiCai reported citing comments by CICC. The opening up of capital accounts and capital movement will stoke external demand, YiCai said.

China's tight inter-bank liquidity is seen easing next month as less government bonds are on offer and tax remissions fall, the Shanghai Securities News reported citing Ming Ming, analyst at CITIC Securities. About CNY550 billion in China Government Bonds and CNY400 billion in local debt will be issued in November, Ming said. Fiscal disbursements may accelerate in November, adding CNY210 billion in liquidity while revenue is likely to dip on seasonal trends, which puts less pressure on tax remission, Ming said.

U.S. politicians who smear China, including creating the so-called China Working Group, are blatantly intervening in Chinese internal affairs, the People's Daily said in an editorial. Actions such as this, the Daily said, attempt to subvert foreign regimes as a tool of policy, and will pose a threat to global politics. Peaceful development and mutual cooperation are the only way forward, as past history has shown that the U.S. has exported war under the cover of humanitarianism and this had made it a destructive force, the Daily said. The U.S. obsession with hegemony and bullying must be stopped, said the newspaper.

MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com
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MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com
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