MNI China Daily Summary: Thursday, January 31

     TOP NEWS: The yuan-denominated Chinese government bonds and policy bank

bonds will be included in the Bloomberg Barclays Global Aggregate Index. The

inclusion will begin in April and continue over a 20-month period, Bloomberg

said. The People's Bank of China(PBOC) said in a statement on its website that

it fully reflects the confidence of international investors in the Chinese

economy, and shows new progress in the opening up of China's financial market,

which will better meet the needs of allocating yuan assets. The PBOC will

continue to improve relevant rules and arrangements, it said.

     DATA: Manufacturing PMI rebounded modestly to 49.5 in January after four

months of decline, beating the forecast of 49.2 in an MNI survey and recovering

from the 49.4 in December, data released by the National Bureau of Statistics

showed. The index remained in contraction, or below the 50 breakeven mark.

Non-manufacturing PMI jumped to 54.7 from 53.8 in December, indicating that the

overall expansion of the sector has accelerated.

     LIQUIDITY: The PBOC injected CNY50 billion via 14-day reverse repos for a

second day, resulting in a net injection of CNY50 billion as no reverse repos

matured today, according to Wind Information. The PBOC said today's OMO is to

maintain overall liquidity reasonable and ample.

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

institutions (DR007) decreased to 2.7014% from Wednesday's close of 2.7467%,

according to Wind Information. The overnight repo average increased to 2.2290%

from Wednesday's 1.9741%.

     YUAN: The yuan appreciated to 6.7055 against the U.S. dollar from

Wednesday's close of 6.7131. The PBOC set the yuan's central parity rate at

6.7025, compared with the 6.7343 on Wednesday.

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

3.1150%, down from Wednesday's closing 3.1200%, according to Wind Information.

     STOCKS: The benchmark Shanghai Composite Index closed 0.35% higher at

2,584.57. Hong Kong's Hang Seng Index increased 1.08% to 27,942.47.

     FROM THE PRESS: Newly issued local government bonds should be used to first

repay arrears, and wage arrears of migrant workers must be cleaned before the

Chinese New Year, Premier Li Keqiang told a State Council executive meeting on

Wednesday, urging local governments and large state-owned enterprises to repay

the arrears to private and small enterprises, People's Daily reported today. At

present, the government and SOEs have settled accounts of more than CNY160

billion, the newspaper said.

     The scale of new credit in January may exceed CNY3 trillion, boosted by a

number of policies introduced to support credit expansion, along with the PBOC's

intention to keep liquidity ample over the Chinese New Year, said Securities

Daily today citing analysts. Some analysts, including Zhang Jun, chief economist

at Morgan Stanley Huaxin Securities, are concerned that credit growth may not be

maintained due to lower appetite of consumers and companies for risks, the Daily

said.

     The State Administration of Foreign Exchange (SAFE) is looking to deepen

reform of China's FX market to better meet consumers' and companies' need to

hedge, said China Forex, a magazine run by SAFT late Wednesday citing the

spokeswoman Wang Chunying. The measures may be introducing new trading tools,

boosting liquidity, opening up to more market players, improving market

infrastructure and strengthen international competitiveness, Wang said. 

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

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

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