MNI China Daily Summary: Thursday, August 31

     TOPS NEWS: The Ministry of Commerce is planning to issue and implement an

action plan aiming to protect intellectual property rights of foreign investors,

ministry spokesman Gao Feng said Thursday. The Office of the National Leading

Group on the Fight Against IPR Infringement and Counterfeiting, which is

currently part of the ministry, is working with other government bodies on a

plan to take measures to protect the IPR of foreign companies in China after

finishing related surveys. "This is the first time in recent years that China

has undertaken a special action aimed at IPR protection," Gao said, stressing

that the campaign would focus on clamping down on the theft of foreign

companies' secrets, illegal competition in brand registration and brand use, as

well as copyright infringement on the internet.

     TOP NEWS: More than 30 cities have issued new policies on developing the

rental housing market as China enters a "rental era" for property development,

the Economic Information Daily reported Thursday. With the addition of Hangzhou

on Wednesday, 11 of the 12 cities the central government has designated as pilot

cities to develop the rental housing market have created new policies to support

the initiative. Analysts told the newspaper that the property market's

increasing focus on rentals will reduce unreasonable demand for home purchases.

The newspaper also cited an analyst who said that the expansion of rentals would

be a major change in the property market. In China's cities, 160 million

individuals, or 21% of the permanent population, are renting houses, according

to data from the Ministry of Housing and Urban-Rural Development. Mao Daqing,

founder of UrWork, a workspace-sharing company, projects that China's rental

market volume will reach CNY3 trillion in the next decade, with 230 million

individuals renting houses, the newspaper said. (Economic Information Daily)

     DATA: The official China manufacturing purchasing managers index (PMI),

jointly released by the China Federation of Logistics and Purchasing (CFLP) and

the National Bureau of Statistics, rose to 51.7 in August from 51.4 in July. The

August index matched the level of 51.7 in June and was the second-highest level

this year after 51.8 in March. The pickup in the August manufacturing PMI was

unexpected, with the median forecast of an MNI survey showing an expectation for

the index to ease back to 51.3. The August reading was the 13th consecutive

month that manufacturing sentiment has been above the 50-point mark, which

divides expansion from contraction. It was also the 11th consecutive month that

the index has been above the 51-point mark.

     POLICY: Chinese non-financial corporate debt risks are likely to rise as

high leverage, industrial overcapacity and low investment efficiency continue to

negatively impact companies' profitability and debt repayment capacity, while at

the same time making them more vulnerable to real and financial shocks,

according to economists and analysts. The ratio of corporate debt to GDP in

China is estimated to be as high as 155%, according to a recent report by the

Asean+3 Macroeconomic Research Office (AMRO), warning that the ratio could rise

to 200 percent by 2030 if the Chinese government does not carry out effective

and comprehensive structural reforms.

     POLICY: It is "too early to say" that China has entered the stage where

capital outflows will always exceed capital inflows, Commerce Ministry spokesman

Gao Feng said at a press briefing on Thursday. Although China has placed the

same level of importance on both goods exports and capital exports, it still

lags behind traditional "net capital outflow countries" in terms of the amount

of its overseas direct investments, Gao said. "Chinese companies going abroad is

still at an early stage," he said. "The Chinese government will continue to

support and guide real and legal outbound investments of qualified companies in

order to enhance the quality and efficiency of China's outbound investments."

     POLICY: The China Shopping Mall Development Index (SMDI), which measures

sentiment among shopping mall operators and managers, dipped slightly in the

second quarter, the Ministry of Commerce said Thursday. The index stood at 64.8

in the second quarter, down 3.5 points from the first quarter. Ministry

spokesman Gao Feng said at a briefing that the drop was due to summer promotion

season not yet being fully implemented after the peak shopping season around

Chinese New Year break. The Shopping Mall Projection Index, which gauges

sentiment on the outlook for the segment, rose to 75.1, with 95% of shopping

mall owners projecting their revenue would rise in the period ahead. The

ministry also said the new report shows brands' willingness to open new shops in

shopping malls is strong. Due to greater investment in marketing and technical

applications, operational costs have continued to edge up. Gao said Chinese

shopping malls have maintained a good development momentum, with owners and

managers more confident in the sales outlook with the approach of the National

Day holiday break the first week of October and the year-end discounting season.

     RATES: Money market rates were mixed on Thursday after the PBOC drained a

net of CNY40 billion via its open-market operations. The seven-day repo average

was last at 2.9133%, up from Wednesday's average of 2.8823%. The overnight repo

average was at 2.8761% compared with Wednesday's 2.9182%.

     YUAN: The yuan fell against the U.S. dollar Thursday after the People's

Bank of China set a stronger daily fixing. The yuan was last at 6.5969 against

the U.S. unit, dipping 0.07% compared with the official closing price of 6.5927

on Wednesday. The People's Bank of China set the yuan central parity rate

against the U.S. dollar at 6.6010 Thursday, modestly stronger than Wednesday's

6.6102.

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

3.6044%, up from the previous close of 3.6010%, according to Wind, a financial

data provider.

     STOCKS: Stocks were down, leading lower by the railway freight and mining

service sectors. The benchmark Shanghai Composite Index closed down 0.08% at

3,360.81. Hong Kong's Hang Seng Index was 0.55% lower at 27,940.24.

     FROM THE PRESS: Twenty-five publicly traded banks had a collective average

daily profit of CNY4.3 billion in the first half of this year, after efforts to

reduce the issuance scale of negotiable certificates of deposit and improvements

in asset quality led to a rebound in earnings, the China Securities Journal

reported Thursday. Statements from the 25 listed banks, whose stocks trade as A

shares, showed a net profit of CNY774.6 billion collectively in the first half

of the year, CNY36.3 billion more than the same period last year, a 4.92%

increase. The newspaper cited analysts as saying that banks' revenue would

improve further in the third quarter. Because deleveraging in the financial

sector is a continuous process, several managers of listed banks told the

newspaper they expected money market rates in the second half to remain high,

putting some pressure on profit growth. (China Securities Journal)

     Bai Yingzi, head of the reform department at the State-owned Assets

Supervision and Administration Commission of the State Council, said Wednesday

there would be no set timetable or specific number target for the consolidation

of enterprises operated by the central government, the 21st Century Business

Herald reported Thursday. Bai said the commission would aim for a more

reasonable resource allocation, more precise development strategies and more

efficiency. He stressed that supply-side reform would be the main theme of the

next stage of restructuring. (21st Century Business Herald)

     Rental home prices in the Xiongan New Zone, the state-level district China

established as a new development hub for the Beijing-Tianjin-Hebei area, have

surged to twice or even four times what they were before the zone was created,

Caixin magazine reported Thursday. The government is placing controls on the

housing market to tackle the problem, the magazine said. Beijing has designated

the district to be the location for "non-core" functions of the capital, and

companies, universities and government agencies are expected to move in and

increase demand for housing, leading to a jump in prices. The local government

in Rongcheng Township, where prices for rentals were up two to four times and

office rental prices were up two to three times, said the main reason for the

rise was the arrival of 65 large companies to the area. (Caixin)

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

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

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