MNI China Daily Summary: Thursday, December 12

     POLICY: Chinese and U.S. trade negotiators are maintaining close

communication, Gao Feng, the spokesman of the Ministry of Commerce, said at a

regular briefing on Thursday, declining to comment on the progress of the trade

talks. Gao repeated that some U.S. soybeans and pork shipments are receiving

exemptions from additional tariffs. China will diversify trading partners by

inking free trade agreements with more countries, developing Free Trade Zones,

lowering tariffs and encouraging investment, Gao said. 

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

for more than three weeks. Liquidity was unchanged today given no reverse repos

mature, according to Wind Information. Total liquidity in the banking system is

reasonable and ample, enough to offset government bond issuance, the PBOC said.

     RATES: The seven-day weighted average interbank repo rate for depository

institutions (DR007) fell to 2.3067% from Wednesday's close at 2.3702%, Wind

Information showed. The overnight repo average fell to 2.0490% from 2.0687%. 

     YUAN: The yuan strengthened to 7.0333 against the dollar from Wednesday's

close of 7.0386. The PBOC set the dollar-yuan central parity rate lower for a

third day at 7.0253, compared with Wednesday's 7.0385.

     BONDS: The yield on 10-year China Government Bond was last at 3.1850%, flat

from the close of Wednesday, according to Wind Information.

     STOCKS: The benchmark Shanghai Composite Index edged down 0.30% to

2,915.70. Hong Kong's Hang Seng Index rallied 1.31% to 26,994.14.

     FROM THE PRESS: China's top leadership is holding its annual Central

Economic Work Conference this week to set economic agenda for 2020, the China

Business News reported. China is expected to maintain a marginally easing

monetary policy and relatively tight credit conditions, while enacting proactive

fiscal policy next year, the newspaper said citing analysts. Further reform of

state-owned enterprises, interest rate liberalization and the household

registration system are also expected, according to the report.

     China central government should give more authorities to local governments

in finance and land to boost their investment incentives, the China Securities

Journal said citing Liu Lifeng, a researcher at the Institute of Macroeconomic

Research at the National Development and Reform Commission. China should expand

government debt financing channels and infrastructure-backed special bonds for

regional development, Liu said. Central government construction bonds, used to

fund infrastructure projects in 1998-2002, can be restarted, Liu told the

newspaper.

     Mergers and acquisitions in the banking industry should be encouraged to

help prevent financial risk and protect the interests of depositors, as many

small and local banks come under pressures from slower growth, the China

Securities Journal said citing a report by Lian Ping, chief economist with Bank

of Communications. 

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

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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