MNI China Daily Summary: Thursday, August 9

     TOP NEWS: China's trade performance showed unexpected resilience in the

early days of the ongoing trade conflict with the U.S, with exports growing at a

robust pace in July. Meanwhile, bolstered by recent tariff cuts on consumer

goods and autos, imports surged at the start of Q3. The trade surplus with the

U.S., still China's largest export market, narrowed slightly to $28.09 billion

from a record of $28.93 billion in June.

     DATA: The National Bureau of Statistics released China's July CPI and PPI

data today. CPI rose 0.3% m/m and 2.1% y/y in July, above the median projection

of 1.9% y/y taken from MNI's poll. PPI, meanwhile, registered at 4.6% y/y in

July, slowing slightly from 4.7% in June, but coming in higher than the median

estimate of 4.4% in MNI's survey.

     LIQUIDITY: The People's Bank of China (PBOC) skipped open market operations

on Thursday, explaining that a high level of liquidity can offset the impacts of

bond issuances and tax payments. No reverse repos matured today. CFETS-ICAP's

money-market sentiment index closed at 33 on Wednesday, up from 30 on Tuesday.

     MONEY MARKET RATES: The benchmark 7-day deposit repo average rose to

2.3559% on Thursday from 2.2480% on Wednesday; the overnight average increased

to 1.6168% from 1.4039% on Wednesday: Wind Information.

     YUAN: The yuan strengthened to 6.8297 against the U.S. dollar on Thursday

from yesterday's 6.8316 closing, despite today's weaker fixing. The PBOC set the

yuan central parity rate at 6.8317, weaker than Wednesday's 6.8313. USDCNH has

edged lower today in line with the recovery in rates and stocks. The pair has

broken below the steep uptrend in place since the July 10 lows and needs to fall

below the 21-DMA at 6.7945 to suggest a bearish reversal pattern is underway.

     BONDS: The yield on the benchmark 10-year China Government Bond was last at

3.5450%, up from the previous close of 3.5000%, according to Wind Information.

     STOCKS: Shares rebounded solidly in Shanghai, led by electronics,

communications and computer stocks. The Shanghai Composite Index closed 1.83%

higher at 2,794.38, having risen above the 2800-level at one point in the

afternoon. Hong Kong's Hang Seng Index rose 0.81% to 28,589.92.

     FROM THE PRESS: China's National Development and Reform Commission (NDRC)

may boost the issuance of special local government bonds and enhance policies to

support infrastructure projects that can generate cash flow, Shanghai Securities

News said, citing Ye Jitao, a specialist on public-private partnerships by the

NDRC and the finance ministry. China may implement policies to establish

long-term financing mechanisms for infrastructure to help to stabilise

investment, the paper said, citing an unidentified source involved in recent

studies. The new policies may encourage private funds to participate in PPP

programmes in some industries that need capital, the newspaper said, citing Ye.

     China's decision to impose retaliatory tariffs on U.S. goods at noon on

August 23 -- a departure from its usual practice of implementing such measures

at midnight -- is a sign of its determination to defend itself amid the ongoing

trade spat, the 21st Century Business Herald reported, citing Tu Xinquan,

director of the China Institute for WTO Studies. The new tariffs exclude crude

oil, as China needs to import more of this, the newspaper said, citing Bai Ming,

deputy director of the International Market Research Institute of the Ministry

of Commerce (MOFCOM). New tariffs on automobile imports are expected to be

especially effective, by having a much greater impact on the U.S. than on China,

the newspaper cited Bai as saying.

     Debt-equity swap programmes will be a key approach used for structural

deleveraging, China Securities Journal reported, following yesterday's

publication of a joint notice from various government departments. China will

provide policy support for capital market operations such as IPOs, private

placements and major asset restructuring, the newspaper said. China will also

use monetary policy tools such as targeted required reserve ratio cuts to

provide long-term financial support for debt conversion programmes, the

newspaper added.

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

--MNI London Bureau; +44 207-862-7489; email: ukeditorial@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]