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MNI China Daily Summary: Thursday, August 29

MNI (London)
     LIQUIDITY: The People's Bank of China (PBOC) skipped open market operations
(OMOs). This resulted in a net drain of CNY140 billion given the maturity of
CNY60 billion in reverse repos and CNY80 billion of Treasury's cash deposits at
commercial banks, according to Wind Information. The increased fiscal spending
by month-end offsets the maturity of Treasury's cash management and reverse
repos, keeping the liquidity in the banking system reasonable and ample, the
PBOC said.
     RATES: The 7-day weighted average interbank repo rate for depository
institutions (DR007) fell to 2.6711% from 2.7145% on Wednesday, Wind Information
showed. The overnight repo average decreased to 2.4611% from 2.5976% yesterday.
     YUAN: The yuan strengthened to 7.1514 against the dollar from Wednesday's
close of 7.1635. The PBOC set the dollar-yuan central parity rate higher at
7.0858, compared with 7.0835 on Wednesday.
     BONDS: The yield on 10-year China Government Bond was last at 3.0275%, down
from the close of 3.0525% on Wednesday, according to Wind Information.
     STOCKS: The benchmark Shanghai Composite Index edged down 0.10% to
2,890.92. Hong Kong's Hang Seng Index increased 0.34% to 25,703.50.
     FROM THE PRESS: Chinese banking regulators are planning to roll out
policies on the disposal and restructuring of high-risk banks, Economic
Information Daily reported. At present, risky commercial banks can be taken over
by state-owned banks while in the future, regulators may allow rural commercial
banks to seize problematic agricultural commercial banks, rural credit
cooperatives and town banks, the newspaper said citing Dong Ximiao, a VP at the
Chongyang Institute for Financial Studies. Banks should take more responsibility
through improving their corporate governance and introducing new strategic
investors, the report said citing Wang Yifeng, the chief banking analyst at
Everbright Securities.
     The Chinese yuan's break through the psychologically important level of
seven against the U.S. dollar would help drive the further liberalisation of the
exchange rate, according to a commentary in China Money, a PBOC-operated
magazine. The article, by Guan Tao, a former official at the State
Administration of Foreign Exchange, said the break through would unlock a wider
range which would strengthen the flexibility of the yuan and test the
adaptability of the market to currency fluctuation. Any shock from the yuan's
new level was quickly absorbed by the market, which had confidence in the
Government. Guan said the PBOC had shown its ability to manage market
expectations, and said the currency would not have a free fall.
     A number of banks have recently received window guidance to tighten their
lending to real estate developers, Tencent News reported citing unnamed sources.
The banks have been advised to maintain their property development loans at
end-March levels, the report says, meaning the balance of loans will be reduced
from CNY11.04 trillion at the end of Q2 to Q1's CNY10.85 trillion. Tencent says
this could also be reduced further.
--MNI Beijing Bureau; +86 (10) 8532-5998; email:
--MNI London Bureau; tel: +44 203-586-2225; email:
[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]
MNI London Bureau | +44 203-865-3812 |
MNI London Bureau | +44 203-865-3812 |

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