MNI China Daily Summary: Thursday, January 17

     TOP NEWS: Establishing a more open, transparent, secure and efficient bond

market is part of China's effort to promote financial reform, Pan Gongsheng,

deputy director of the People's Bank of China(PBOC) said on Thursday at a forum

in Beijing. China is planning to launch index products like bond ETF, fully open

repo transactions, and vigorously promote the development of yuan derivatives

market, according to Pan. The State Administration of Foreign Exchange will also

make it easier for foreign investors to conduct currency hedging transactions.

     TRADE WAR: China's Vice Premier Liu He will pay a visit to the U.S. for

trade negotiations on Jan 30-31, Gao Feng, the spokesman of the Ministry of

Commerce, said in a presser today.

     LIQUIDITY: The PBOC today injected CNY250 billion via 7-day reverse repos,

and CNY150 billion through 28-day reverse repos, adding liquidity for a fourth

consecutive day. The net is an injection of CNY380 billion given the maturity of

CNY20 billion reverse repos, according to Wind Information. The PBOC said China

is currently in the tax season and the liquidity in the banking system is

falling rapidly.

     RATE: The 7-day weighted average interbank repo average rate for depository

institutions (DR007) decreased to 2.5361% from Wednesday's close of 2.6137%,

Wind Information showed. The overnight repo average decreased to 2.2509% from

Wednesday's 2.2832%.

     YUAN: The yuan depreciated to 6.7675 against the U.S. dollar from

Wednesday's close of 6.7550. The PBOC set the yuan's central parity rate

stronger against the dollar at 6.7592 today, compared with 6.7615 Wednesday.

     BONDS: The yield on the benchmark 10-year China Government Bond was last at

3.0825%, down from Wednesday's closing 3.0900%, according to Wind Information.

     STOCKS: The benchmark Shanghai Composite Index closed 0.42% lower at

2,559.64. Hong Kong's Hang Seng Index decreased 0.56% to 26,752.49.

     FROM THE PRESS: The depreciation of the yuan does not necessarily lead to

capital outflow. Though the yuan was under great depreciation pressure last

year, China actually had a net inflow of capital, said IFENG News today citing

Guan Tao, former director of the Balance of Payments Department under SAFE. Guan

also mentioned that the current appreciation of the yuan is likely short-term

driven by a weak dollar and the Fed's dovish signal in interest rate hike, IFENG

News said.

     China must boost domestic demand and consumption to cope with the economic

downward pressure, Premier Li Keqiang told a symposium in Beijing, according to

a statement on the government' website late Wednesday. It is also necessary to

boost effective investment in public services and infrastructure, including

information infrastructure, Li added.

     China won't become another America, nor will it replace the U.S., the

People's Daily said today citing Foreign Minister Wang Yi. It is a serious

strategic misjudgment for some people in the U.S. to suspect that the rise of

China will lead to a hegemony which will challenge or replace the U.S., Wang

added. Wang also said the two countries have the will to expand economic and

trade cooperation. They should have the ability and wisdom to push for a

mutually acceptable solution.

     Relevant government departments are preparing to draft documents to promote

the high-quality development of National Economic and Technological Development

Zones (NETDZ), which will be given more reform autonomy, the Economic

Information Daily reported. NETDZs are undergoing industrial upgrades with

addition of high-end manufacturing and other modern industries, the daily said.

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

[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]