MNI China Daily Summary: Thursday, December 21

     TOPS NEWS: China has pledged to fully implement a series of policy

prescriptions over the next three years in line with President Xi Jinping's

"Socialist Economic Thought," focused on a "prudent and neutral" monetary

policy, reining in financial risks, continued supply-side reforms, environmental

protection and various market-opening measures. The government also said

Wednesday in a communique at the end of its three-day Central Economic Work

Conference, which sets the course of the country's economic policies, that it

was prepared to promote private investment and continue to stabilize the

country's property market in order to prevent a bubble, while at the same time

more fully opening its housing system and encouraging renting. "Prudent monetary

policy should be kept neutral, the floodgates of monetary supply should be

controlled, and credit and social financing should see reasonable growth," the

statement said. "Meanwhile, the proactive orientation of fiscal policy will be

maintained, while the structure of fiscal spending should be optimized."

     TOP NEWS: The Chinese government plans to further develop the rental

housing market next year as it looks to stabilize the overall property market

while at the same time buoying the world's second-largest economy, although

implementation of a long-awaited property tax system remains a distant goal. At

the annual Central Economic Work Conference, Chinese President Xi Jinping and

Premier Li Keqiang stressed the need to bolster the country's residential rental

property market, especially the long-term rental market, next year. The CEWC

also addressed the necessity of consistency and stability of control policies

within the property market while further improving the long-term overall

property system to ensure the stable and healthy development of the sector. "It

shows that controls on the property market next year would not be further

tightened as large hotspot cities have already seen their property markets

cool," Yang said in an interview with MNI. "But if some lower-tiered cities'

markets heat up, a few tightening policies might emerge."

     POLICY: China hopes the U.S. can abandon its "Cold War mentality" of

dominating the world and defend a healthy and stable Sino-U.S. trade and

economic relationship, Commerce Ministry spokesman Gao Feng said Thursday at a

regular press briefing. China is against the stance of simply viewing a trade

relationship as competition where one side would lose and the other would win;

rather, it prefers to regard trade partners as cooperators, Gao said in response

to comments by U.S. President Donald Trump earlier this week saying that China

is a major rival power for the U.S. China will never implement so-called

economic invasion policies, Gao stressed.

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

net CNY10 billion via open-market operations. The seven-day repo average was

last at 2.8194%, down from Wednesday's average of 2.9024%. The overnight repo

average was at 2.6256% compared with Wednesday's 2.6963%.

     LIQUIDITY: The People's Bank of China announced on its website Thursday

morning that it had injected CNY30 billion in liquidity via seven-day reverse

repos, CNY30 billion via 14-day reverse repos and CNY10 billion via 28-day

reverse repos, with rates unchanged at 2.50%, 2.65% and 2.80%, respectively. The

PBOC did not give further explanations about its operations this morning. This

resulted in a net drain of CNY10 billion for the day, as a total of CNY80

billion in reverse repos matured on Thursday. It was the first time that the

PBOC has drained liquidity via its reverse repos since last Thursday.

     YUAN: The yuan rose against the U.S. dollar after the People's Bank of

China set a stronger daily fixing. The yuan was last at 6.5723 against the U.S.

unit, rising 0.12% compared with the official closing price of 6.5798 on

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

the U.S. dollar at 6.5795 on Thursday, much stronger than Wednesday's 6.6066.

Today's fixing was the highest since Sept. 20, and marks the biggest daily rise

since Oct. 11.

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

3.9050%, up from the previous close of 3.9000%, according to Wind, a financial

data provider.

     STOCKS: Stocks rose, led higher by the coal and natural gas sectors. The

benchmark Shanghai Composite Index close up 0.38% at 3,300.06. Hong Kong's Hang

Seng Index was 0.61% higher at 29,413.60.

     FROM THE PRESS: Chinese economic growth will see the first annual rise in

2017 since 2010, Sheng Laiyun, chief economist with the National Bureau of

Statistics, said Thursday at an economic forum in Beijing, adding that China

would lower expectations on economic growth and focus on structural adjustments.

China has done a good job in economic control and has made progress in

transitioning from old economic drivers to new ones, Sheng argued. The country

will also pay more attention to indexes including consumption, employment and

people's welfare, Sheng said. (China News Agency) 

     China needs to pursue high-quality growth as required by the Central

Economic Work Conference this week, the official People's Daily said in a

front-page editorial on Thursday. The newspaper stressed the importance of

innovation, coordination, green development and further opening of China's

economy. The economic system needs to have proper macro-controls. Fiscal policy

needs to be remain proactive and monetary policy neutral, the newspaper said.

(People's Daily)

     China is expected to continue to reduce arbitrage of financial regulations

next year, and lower cross-market, cross-sector and cross-field financial risks

to let more capital flow into the real economy, the Financial News, a newspaper

of the People's Bank of China, said Thursday in an analysis of the Central

Economic Work Conference. The conference is one of the most important annual

events as China plans its economic development for the next year. The

conference's emphasis on a "prudent and neutral" monetary policy shows the

government's determination to stabilize the monetary and financial environment

for steady economic growth, said Chen Ji, a senior financial researcher at China

Construction Bank. It is possible to use several tools simultaneously to reduce

market fluctuations and tackle liquidity risks while maintaining relative

stability of liquidity conditions and interest rates, Chen said. The Central

Economic Work Conference also focused on cracking down on illegal financial

activities, which an analyst said could be interpreted as indicating that there

will be more controls on financial technology and private financing, the two

most problematic sectors. (Financial News)

     The meaning of gross domestic product has weakened for China, and

high-quality development will be a "hard requirement," the Economic Information

Daily, a newspaper of the official Xinhua News Agency, said in a commentary on

Thursday. If China follows the principles of insisting on stability while

seeking advancement, and keeping economic development in a reasonable range,

economic growth will be steady and resilient. The economy will not shrink too

fast or lose its balance, making for a higher-quality economy, the commentary

said. Quantitative easing policies and negative interest rates around the world

have barely stimulated the real economy and instead delayed economic

restructuring, it said. Three transformations are important for the country:

from "made in China" to "innovate in China"; from "China's speed" to "China's

quality"; and from "large manufacturing country" to "strong manufacturing

country," the newspaper argued. As China enters a new stage of pursuing

high-quality development, it will continue to lead global economic growth and

could inspire supply-side structural reforms around the world, the commentary

said. (Economic Information Daily)

     Chinese companies' bond issuance overseas has accelerated quickly this

year, and analysts expect the same next year, the Economic Information Daily

reported Thursday. Chinese companies have issued U.S. dollar-denominated bonds

worth a record $180 billion so far in 2017, a 70% increase from the same period

last year, according to Bloomberg data. The jump is partly because of an

increase in financing costs in the domestic bond market. Chinese companies also

seek to raise money outside the country as their exposure to the international

market has increased and they have become more familiar with overseas bond

issuance, an analyst said. Chinese companies now issue around 65% of all bonds

in the Asian market, and the proportion could go above 70%. Chinese bond

issuance overseas is expected to reach $200 billion. (Economic Information

Daily)

--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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