MNI China Daily Summary: Thursday, February 8

     TOP NEWS: Anti-dumping charges should not be used as a tool for

protectionism, China's Ministry of Commerce spokesman Gao Feng said at a

briefing on Thursday, in response to questions about the U.S. increasing tariffs

on Chinese goods and starting investigations on China's trade practices. China

maintains its opposition to U.S. acts of unilateralism and protectionism, Gao

said. China's anti-dumping charge on U.S. sorghum shipment is based on facts,

not a measure of retaliation against the U.S. trade measures, he added. China's

trade surplus with the U.S. would be significantly lower on value-added basis

and the two sides' trade interests are relatively balanced, he added. 

     DATA: China's imports in January surged 36.9% year-on-year to $180.18

billion in U.S. dollar terms, well above the market consensus of 8.5% growth. It

marked the highest monthly increase since February 2017, as well as the 15th

monthly increase in a row. In yuan terms, imports rose 30.2% year-on-year to

CNY1.32 trillion. The sharp 3.5% Yuan appreciation last month has contributed to

the jump. MNI has sorted out five things we learned about China's trade data

today. 

     DATA: The appreciation of non-dollar currencies pushed up the value of

China's foreign-exchange reserves in January, which was the 12th consecutive

month that the reserves have increased, according to China's central bank. FX

reserves increased by $21.51 billion to $3.16 trillion as of Jan 31, the highest

level since September 2016, according to data released Wednesday by the People's

Bank of China (PBOC). The gain is slightly higher than the $20.67 billion

increase recorded in December.

     LIQUIDITY: The PBOC skipped its Open Market Operations (OMO) on Thursday,

stating on its website that liquidity in the banking system is at a "relatively

high" level which can absorb the impact of cash withdrawals. Today was the 11th

day that the central bank has refrained from conducting OMO. Liquidity condition

remains unchanged, as no reverse repos mature. The CFETS-ICAP's money-market

sentiment index closed at 40 yesterday, down from 41 at Tuesday's close. 

     RATES: Money market rates rose after PBOC's inaction of open-market

operations resulted in no changes of liquidity. The 7-day repo average was last

at 2.9060%, up from Wednesday's average of 2.7145%. The overnight repo average

was at 2.5620% compared with Wednesday's 2.5617%.

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

China set a stronger daily fixing. The yuan was last at 6.3310 against the U.S.

unit, dropping 1.14% compared with the official closing price of 6.2596

yesterday. The PBOC set the yuan central parity rate vs the U.S. dollar at

6.2822 on Thursday, stronger than Wednesday's 6.2882. Today is the second

straight day parity was set stronger.

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

3.8850%, down from the previous close of 3.9700%, according to Wind.

     STOCKS: Stocks dipped in Shanghai, led lower by insurance companies shares,

with China Life Insurance Company down 5.37%. The benchmark Shanghai Composite

Index closed down 1.43% at 3,262.05. Hong Kong's Hang Seng Index was 0.32%

higher at 30,420.44. 

     FROM THE PRESS: China has drawn up a blueprint of a new round of opening up

the financial sector to overseas firms, said the official Economic Information

Daily on Wednesday. Financial services, mainly banking, securities, funds and

insurance, will be the highlights this year. Stocks, bonds and the

convertibility of capital account will be opened more gradually and prudently.

     As China pushes forward its campaign of preventing financial risks and

deleveraging, banks' wealth management products will grow more slowly, or even

contract in 2018, China Securities Journal reported. Interbank lending will be

limited, off-balance-sheet financing will be restricted, and a large amount of

WMPs will have to be re-valued, which will cause the scale of WMPs to shrink,

especially for small to medium-sized banks, the newspaper said.

     Bonds issued to revitalize shantytowns in Chinese cities are likely to

become the fourth type of special bonds allowed to be issued by local

government, 21st Century Business Herald reported. Many local governments

welcomed the shantytown renovation bonds, as they believed the bond will lower

funding costs. The previous three special bonds were introduced in 2017,

including special bonds backed by land reserves, and two other bonds supporting

the building of toll roads and rail roads, the report said. The three special

bonds issued totalled CNY286.7 billion in 2017, accounting for around 35% of the

quota of special bonds.

     Banks need to form a compliance culture to ensure healthy development,

optimize structure of assets and focus on lending to businesses to support the

real economy, the China Securities Journal said. They shall not only pursue

faster growth, it said.

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

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

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