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CHINA RATES

China Repo Rates Rise on Monday

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In Line With The Broader Theme

     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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