MNI China Daily Summary: Thursday, July 19

     TOP NEWS: The People's Bank of China (PBOC) is increasing liquidity

injections to ease tight credit conditions and stabilize the economy. However,

as Chinese financial regulators continue to implement 'de-risking' measures, the

impact of these liquidity injections has so far been minimal, as major

refinancing channels are restricted and lenders' risk appetite is relatively

depressed, sources have told MNI.

     LIQUIDITY: The PBOC injected CNY70 billion via its 7-day reverse repos and

CNY30 billion via its 14-day reverse repos on Thursday to cushion the impact of

bond issuance payments and maturations of reverse repos, according to a

statement on the PBOC's website. The PBOC injected net CNY70 billion as a total

of CNY30 billion reverse repos matured today. CFETS-ICAP's money-market

sentiment index closed at 33 on Wednesday, down from 37 on Tuesday.

     MONEY MARKET RATES: Benchmark 7-day deposit repo average fell to 2.6370% on

Thursday from 2.6640% on Wednesday; Overnight average decreased to 2.3929% from

2.4819% on Wednesday: Wind Information.

     YUAN: The yuan declined against the U.S. dollar to 6.7227 from the previous

close of 6.7145. The PBOC set the central parity rate at 6.7066, weaker than

Wednesday's 6.6914. Today's fixing is the lowest since Aug 9, 2017. USDCNH just

broke the 6.7800 level, dropping 400bps within the day, with no end in sight to

the yuan's drop. 6.9000 remains the measured move target from the July range and

the fundamentals seem to support such a move given the ongoing collapse in

interest rate swaps relative to the US.

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

3.4400%, down from the previous close of 3.4700%, according to Wind Information.

     STOCKS: Shares in Shanghai continued to decline as persistent yuan weakness

hit airline stocks. Shanghai Composite Index shed 0.53% lower at 2772.55,

marking the fifth consecutive session of losses. Hong Kong's Hang Seng Index

declined 0.24% to 28049.90.

     FROM THE PRESS: The PBOC has advised banks to provide medium-term lending

facility (MLF) funds for primary dealers to support loan placement and bond

investment, 21st Century Business Herald reported, citing financial

professionals. Additional MLF funding will be allocated to lower-rated bonds to

alleviate the impact of frequent bond risks, the newspaper said. The PBOC's move

signals the end of its "loose currency and tight credit" policy, said Ding

Anhua, chief economist of China Merchants Bank, according to the newspaper. The

PBOC will not reverse its monetary policy, but may use some instruments to

cushion the pressure on the economy in the third and fourth quarters, the

newspaper said, citing an anonymous analyst.

     China Banking Regulatory Commission (CBRC) has urged financial institutions

to increase loans and cut financing costs for private, small- and micro-sized

enterprises, reported Xinhua News Agency. Large and medium-sized banks should

lead the way in increasing loans to small- and micro-sized enterprises, and

should establish proper and preferential loan prices to bring down the lending

rate, Xinhua said. Financial institutions should also categorize enterprises and

tailor their services and policies to individual businesses, Xinhua added.

     Local governments are still in charge of approving loan contracts for

shantytown renovation projects, Xinhua News Agency reported, citing a manager of

China Development Bank (CDB). The CDB has not tightened approvals for shantytown

renovation projects, but will review the contracts after local governments'

approvals to prevent excessive borrowing and potential risks, Xinhua said,

citing the manager. Local governments have issued a total of CNY460.9 billion in

loans as of the end of June this year, the manager noted, according to Xinhua.

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

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

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