MNI China Daily Summary: Thursday, January 11

     TOP NEWS: China on Thursday repudiated a media report that it is

considering slowing or suspending purchases of U.S. treasuries. "The news may

have been from an incorrect information source, or it may have been fake news,"

the State Administration of Foreign Exchange, the central bank's division in

charge of managing its foreign exchange reserves, said on its website. Some

Chinese officials reviewing the nation's FX holdings recommended slowing or

halting purchases of U.S. Treasury, Bloomberg News reported Wednesday. China

invests its FX reserves in U.S. Treasury in accordance with market conditions

and its investment needs, and its FX managers are responsible investors, it

said.

     RATES: Money market rates were higher. The seven-day repo average was last

at 2.9244%, compared with Wednesday's average of 2.8352%. The overnight repo

average was at 2.8364%, compared with Wednesday's 2.6450%.

     LIQUIDITY: The PBOC injected CNY30 billion in seven-day reverse repos and

CNY30 billion in 14-day reverse repos via open-market operations today,

according to Wind Information. This resulted in net CNY30 billion injection,

given that CNY30 billion in reverse repos mature today.

     YUAN: The yuan rose against the U.S. dollar after the PBOC set the fixing

rate stronger. The yuan was last at 6.5045 against the U.S. unit, compared with

the official closing of 6.5179 yesterday. The PBOC set the yuan central parity

rate at 6.5147, 0.09% stronger than Wednesday's 6.5207.

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

3.9500% up from the previous close 3.9300%.

     STOCKS: Stocks rose in Shanghai, led by rare metals and online education

shares. The benchmark Shanghai Composite Index closed up 0.10% to 3,425.34. Hong

Kong's Hang Seng Index was flat at 31,079.28.

     FROM CHINESE PRESS: China central bank's adjustment of the so-called

countercyclical factor showed that regulators may have been concerned about the

fast appreciation of the currency, as the move will likely curb the yuan's rise,

the Securities Times reported. Now is also an opportunity to reform the exchange

rate system, so authorities should increase the yuan's two-way flexibility and

let market adapt to higher volatility, the newspaper said. FX reform should also

include increasing the number of market participants, relaxing transaction

controls, increasing forex products and liquidity, it said. 

     PBOC may inject cash into the market in the coming weeks given a "neutral"

state of liquidity and a two-week gap in conducting open market operations, the

China Securities Journal reported. As much as CNY289.5 billion medium-term

lending facilities are maturing in January, expected to be renewed by the

central bank in the forms it sees fit, the paper said. 

     Raising prime interest rates can hurt China's growth and employment, the

21st Century Business Herald reported, citing economists and analysts. Raising

rates can also place China's exports at risk, given the threats of U.S.

protectionism, the newspaper said. 

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

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

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