MNI China Daily Summary: Thursday, January 18

     TOPS NEWS: - China's economy grew stronger than expected in the fourth

quarter of 2017, with real GDP gaining annualize 6.8% y/y. The full-year growth

in 2017 was 6.9%, the same as Premier Li Keqiang had indicated last week.

Officials said the growth underlined stable economic conditions. 

- Retail sales rose 9.4% y/y in December, lower than the expected 10.2% gain in

an MNI survey, but in line with the weak import data 

- Industrial output grew 6.2% in December, as MNI expected in its '5 Things To

Look For' preview that industrial output tends to pick up in the last month of a

quarter 

- Infrastructure investment grew 19% y/y, a strong performance supporting GDP

growth 

- Real estate investment grew 7.0% y/y in 2017, a bit higher than 6.9% in 2016

though the government's strict controls on the sector bit. 

     DATA: China banks were net buyers of foreign exchange from their clients in

December, another sign that capital inflows are gaining momentum as the stronger

yuan and capital outflow controls achieved intended effect, according to data

released today by the State Administration of Foreign Exchange (SAFE). SAFE said

that Chinese banks bought a net CNY44.5 billion from clients in December,

compared with a net sale of CNY31.2 billion in November. The number indicates

the level of capital flowing in and out of the country. The larger RMB purchase,

the less the outflow.

     DATA: China new home prices gained at the fastest pace in five months in

December, signaling the strong impulse to invest in property has overcome the

many curbs imposed by authorities concerned with excessive speculation. Average

price of new homes for 70 cities monitored by the National Bureau of Statistics

rose 0.5% m/m in December, up from the 0.4% m/m gain in November and was the

biggest monthly gain since July, according to MNI's calculations based on NBS

data. The survey excluded government-subsidized housing. December's housing

prices were 5.8% higher than a year ago, compared with the 5.5% annual gain in

November.

     LIQUIDITY: PBOC injected CNY80 billion in 7-day reverse repos, CNY70

billion in 14-day reverse repos, CNY10 billion in 63-day reverse repos in Open

Market Operation (OMO) on Thursday. 

- Net CNY90 billion injection after CNY70 billion reverse repos mature. 

- CFETS-ICAP money-market sentiment index ended at 58 on Wednesday. 

     RATES: Money market rates were higher after PBOC injected a net of CNY90

billion via its open-market operations. 

- 7-day repo average was last at 2.9083%, up from Wednesday's average of

2.8343%. 

- The overnight repo average was at 2.7814% compared with Wednesday's 2.7670%.

     YUAN: The yuan gained against the U.S. dollar even as PBOC set a weaker

daily fixing. 

- The yuan was last at 6.4242 against the U.S. unit, rising 0.13% compared with

the official closing price of 6.4325 yesterday 

- PBOC set yuan central parity rate vs U.S. dollar at 6.4401 on Thursday, weaker

than Wednesday's 6.4335 

-PBOC has set the fixing lower for the first time after five trading days of

increase.

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

3.9700%, up from the previous close of 3.9550%, according to Wind Information.

     STOCKS: Stocks rose in Shanghai, led by bank shares, with China Merchants

Bank leading the gain. The benchmark Shanghai Composite Index rose 0.87% at

3,474.75. Hong Kong's Hang Seng Index was 0.43% higher at 32,121.94.

     FROM THE PRESS: An increasing number of regional Chinese governments has

been found to have inflated their fiscal data, Economic Information Daily

reported. 

- 10 cities and counties in four provinces fabricated total CNY1.5 billion

fiscal revenue last year: daily cited the National Audit Office 

- In addition to Liaoning, long known for 'falsifying its books', Inner

Mongolia, Yunnan, Hunan and a number of other provinces were also found with

false reporting, added the publication 

- Fabricating economic data overestimates the debt-paying ability of the local

governments, posing risks to the economy: daily. 

***TAKEAWAY: Ahead of Thursday's 2017 GDP data release, this may be a preemptive

move to address criticisms over the quality of its data by displaying that it is

already addressing the issue.

     China must effectively strengthen financial supervision and contain risks

in the banking sector, the official People's Daily said in a commentary. 

- To have effective financial supervision, regulators must have clear identities

without attachment to the industries that they oversee

- Draft rules released on asset management jointly formulated by the so-called

"one bank, three commissions" must be implemented despite industry opposition

- Regulators must not become the "nanny" of the industry: People's Daily.

***TAKEAWAY: China's central authorities is drumming up tighter controls over

the financial sector and promoting the newly formed financial regulatory

structure with  PBOC coordinating efforts among three regulators in securities,

banking and insurance.

     China should closely watch housing price in Tier-3 and Tier-4 cities, Fan

Hengshan, vice secretary-general of the National Development and Reform

Commission, said at a forum on Thursday, Beijing News reported. Fast growth of

home prices in these cities should be curbed, Fan said.

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

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