MNI China Daily Summary: Thursday, January 16

     POLICY: China's official media hailed the 'phase one' trade agreement

signed with the U.S. in Washington on Wednesday as an "equal and mutually

beneficial" deal that should be cherished as a hard-fought arrangement reached

after 22 months of the trade war, and critics should not only engage in

"nit-picking of the agreement and bad-mouthing future trade negotiations". The

Chinese financial markets appear cautious over the prospects of follow-up

negotiations, as many thorny issues remain unresolved.

     DATA: China's money supply and aggregate financing to the economy all

exceeded market consensus expectations in December, data released Thursday by

the People's Bank of China showed. M2 rose 8.7% y/y, the highest since February

2018's 8.8% and total social financing surged CNY2.1 trillion, compared with

1.75 trillion in November. However, new loans totalled CNY1.14 trillion, less

than the projected CNY1.2 trillion and November's CNY1.39 trillion.

     LIQUIDITY: The PBOC injected a net of CNY300 billion via 14-day reverse

repos with the rate unchanged at 2.65% on Thursday, according to a statement on

the PBOC website. The injection aims to offset the peak demand of tax payments

and cash to keep the liquidity in the banking system at a reasonable and ample

level, the PBOC said.

     RATES: The seven-day weighted average interbank repo rate for depository

institutions (DR007) decreased to 2.6907% from Wednesday's close 2.7867%, Wind

Information showed. The overnight repo average decreased to 2.6130% today from

2.6876% on Wednesday.

     YUAN: The yuan strengthened to 6.8850 against the dollar from Wednesday's

close 6.8871. PBOC set the dollar-yuan central parity rate 38 bps lower at

6.8807. 

     BONDS: The yield on 10-year China Government Bonds was last at 3.1200%,

unchanged from Wednesday's close, according to Wind Information.

     STOCKS: The Shanghai Composite Index lost 0.52% to 3,074.08. Hong Kong's

Hang Seng Index increased 0.38% to 28,883.04.

     FROM THE PRESS: The PBOC is expected to inject around CNY400 billion in

additional liquidity to meet demand during the Chinese New Year period, the

Shanghai Securities News reported citing Yang Weixiao, chief fixed income

analyst at BOC International. Some market participants believe that while the

release of CNY300 billion liquidity via MLF yesterday partially met the need,

keeping the MLF rate unchanged disappointed the market, Yang said.

     China's infrastructure investment should increase by more than 11% y/y to

drive short-term growth, and 7.7% in the longer term to match GDP growth, the

Securities Times reported citing Yan Kun, a Researcher at the National Academy

of Economic Strategy. Fund raising for infrastructure projects may be

constrained by debt risk faced by local government financing vehicles and

declining land sale revenues, the newspaper said citing Yan.

     China's local government bond issuances in 2020 may reach record CNY6

trillion, the China Business News reported citing Ma Liya, senior analyst at the

credit-rating agency Dongfang Jingcheng. New bonds will reach CNY4.35 trillion,

with refinancing accounting for close to CNY2 trillion, with issuances driven by

the need to boost growth.

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

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

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