MNI China Daily Summary: Thursday, December 13

     TOP NEWS: China's Communist Party Politburo convened to discuss the

economic planning next year, Xinhua News Agency reported. The meeting, presided

by the party chief Xi Jinping, who is also the president, calls for China to

promote high-quality development of manufacturing capabilities, deeply integrate

the advanced manufacturing with modern services, develop a strong domestic

market, accelerate restructuring and expand opening, Xinhua said. China should

adhere to the general policy tone of making progress on stability, further

promoting high-quality development, and deepening supply-side reform, Xinhua

said.

     DATA: Foreign direct investment (FDI) into China in November fell on an

annual basis for the first time this year, plunging 27.6% to USD13.6 billion,

data by the Ministry of Commerce showed. That compared with 7.3% y/y gain to

USD9.7 billion in October. The ministry attributed the sharp drop to a high base

of comparison. FDI totaled US$121.26 billion in the first 11 months, marking a

1.1% y/y, compared with 6.5% in Jan-Oct.

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

(OMOs) for a 35th straight trading day, leaving liquidity unchanged. No reverse

repos mature today, according to Wind Information. The central bank said the

level of liquidity in the banking system is at a reasonable and ample level,

which can offset the issuance of government bonds and other factors.

     RATE: The 7-day weighted average interbank repo average rate for depository

institutions (DR007) increased to 2.5959% from Wednesday's close of 2.5471%,

Wind Information showed. The overnight repo average increased to 2.5140% from

Wednesday's 2.4070%.

     YUAN: The yuan appreciated to 6.8690 against the U.S. dollar from

Wednesday's close of 6.8893. The PBOC set the dollar/yuan central parity rate at

6.8769, lower than Wednesday's 6.9064.

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

3.3650%, up from the closing price of 3.2750% on Wednesday, according to Wind

Information.

     STOCKS: The benchmark Shanghai Composite Index closed 1.23% higher at

2,634.05. Hong Kong's Hang Seng Index decreased 1.29% to 26,524.35.

     FROM THE PRESS: The National Development and Reform Commission (NDRC)

doesn't support real estate developers selling bonds to finance commercial

projects, the China Economic Herald, a newspaper run by the NDRC, reported to

clarify a misinterpretation of government policies. The NDRC said yesterday that

it will give priority to companies applying to issue bonds with good credit

standing and stable operations that play a leading role in industrial

restructuring, the newspaper said. The NDRC will only support bond financing for

housing projects in areas limited to urban renewal, affordable housings and

rental housings, the newspaper said. 

***Comment: The NDRC was careful not to stoke another property bubble. Some in

the market earlier interpreted the policy as a greenlight for commercial

developers to increase working capital and accelerate project development.

     China will lower the tax burden for partners in venture capital firms, the

State Council said as a measure to boost innovation. Partners' equity transfer

and dividend yield from one VC fund will be subjected to personal income tax at

a tax rate of 20%, Xinhua News Agency reported late Wednesday. Partners of VC

firms can also choose to pay their personal income tax based on the overall

annual income of the firm, using progressive rates ranging from 5% to 35%, the

report said. The new policy will be effective from 2019 and will run for five

years, the report said.

     Manufacturing investment growth will likely slow in the year ahead, albeit

moderately, as structural reforms will continue to bite and the private-sector

financing difficulties remain, the Securities Daily said in a front-page

commentary. The buoyant growth of manufacturing investment this year has mainly

been driven by high-tech manufacturing, including computers and communication

devices, with double digit growth for nine consecutive months, indicating that

China's industrial capacity has been upgraded somewhat, the newspaper said.

--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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