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     TOP NEWS: The Chinese currency may hold its value against the dollar as the
second-largest economy seeks a smaller trade surplus with the U.S. under
pressure from the administration of President Donald Trump, an influential
former central bank official said in an interview with MNI. While China has
promised to boost imports of U.S. products, its overall international balance of
payment may not change significantly, so the yuan isn't necessarily set for a
straight decline against the greenback, said Guan Tao, former Director-general
of Balance of Payments at the State Administration of Foreign Exchange(SAFE), a
division of the People's Bank of China (PBOC). 
     TOP NEWS: Chinese local government financing companies may incur more bond
defaults this year due to the tight regulatory environment and the
government-led deleveraging campaign, a leading debt analyst told MNI in an
exclusive interview. As China further reins in credit growth, causing financing
costs to rise, the deleveraging campaign and strict financial regulations
continue to weigh on financing and refinancing of LGFVs -- state-owned companies
(SOEs) which were set up by local governments to raise funds for local
infrastructure projects, said Amanda Du, a vice president and senior analyst
with Moody's Public, Project and Infrastructure Finance Group.
     POLICY: Details on the agricultural and trade talks between China and the
U.S. still need to be confirmed by both countries, China's Ministry of Commerce
(MOFCOM) said Thursday. Chinese and U.S. officials had candid, in-depth and
detailed discussions last week in Beijing, said Gao Feng, spokesman of the
ministry, at a regular briefing. China's stance regarding negotiations with the
U.S. is consistent, in that it still does not want trade conflicts to escalate,
stressed Gao. China welcomes more imports from all countries, not only from the
U.S., Gao iterated. He also noted the country will enhance intellectual property
protection for foreign companies.
     POLICY: China will further reduce restrictions, increase protection of
rights, and improve the investment environment for foreign investors in China,
MOFCOM said. The government will help guide foreign investment to the middle and
western parts of the country by making foreign investment more convenient,
providing preferential policies in land and loans, and further opening Chinese
areas to surrounding countries and nations involved in the One Belt, One Road
initiative, the ministry said.
     LIQUIDITY: The People's Bank of China (PBOC) injected CNY20 billion and
CNY20 billion in 7-day and 28-day reverse repos on Thursday, with rates
unchanged at 2.55% and 2.85%, respectively, as the liquidity is at a relatively
high level and local government treasuries' cash management can absorb the
impact of maturing reverse repos, according to a statement on the PBOC website.
It resulted in CNY70 billion net drain as a total of CNY110 billion reverse
repos matured today. CFETS-ICAP's money-market sentiment index closed at 36 on
Wednesday, down from 39 on Tuesday. 
     MONEY MARKET RATES: The 7-day repo average dropped to 2.6928% from 2.7122%
Wednesday, after the PBOC drained CNY70 billion via OMO. The overnight repo
average rose to 2.5340% from Wednesday's 2.5246%.
     YUAN: The yuan rose to 6.3909 against the dollar from Wednesday's closing
of 6.3956. Earlier today, the PBOC set the yuan central parity rate at 6.3919,
stronger than Wednesday's 6.4040, the third day that the parity has been set
stronger and the strongest in nine s.
     BONDS: The yield on benchmark 10-year China Government Bond was last at
3.6800%, up from the previous close of 3.6700, according to Wind Information.
     STOCKS: Shares declined in Shanghai, led lower by healthcare companies,
with Aier Eye Hospital Group down by more than 4%. The benchmark Shanghai
Composite Index closed 0.18% lower at 3,109.50. Hong Kong's Hang Seng Index
gained 0.63% to 31,456.31. 
     FROM THE PRESS: The yuan enjoys a valuation advantage because of China's
stable economic conditions, reported 21st Century Business Herald. The recent
rise of yuan is supported by efforts of more central banks to include yuan in
their foreign exchange reserves, a Hong-Kong based foreign exchange trader said,
cited by the report. This news has encouraged many financial institutions to
hold positions that expect yuan appreciation, and has also caused many financial
institutions to include the yuan in their foreign exchange reserves, the above
trader said, cited by the report.
     Land sales were robust in the first five months, the 21st Century Business
Herald reported. Land sales revenue from January to May reached CNY1.5 trillion,
rising 57.6% y/y, according to data from Centaline Property, a Hong-Kong based
property brokerage company. It was a total of CNY313 billion in May, increasing
111.5% y/y. The performance of land markets for different cities are diverging,
with first-tier and some second-tier cities suffering from lower sales on strict
policies, while third-tier cities' markets are hot, the report said, citing Zhan
Yifan, an analyst at E-house China R&D Institute. Booming land sales in the
first five months were partly caused by property developers' low inventories,
while control policies will make these developers more cautious about buying
too-expensive land, said the report, citing Zhang Bo, the chief analyst at
Anjuke, a Shanghai-based property brokerage company.
     Total outstanding assets of the financial trust industry amounted to
CNY25.41 trillion, CNY833.5 billion less than that recorded at the start of the
year, showing the impact of the financial risk prevention campaign, reported
Securities Times, citing data published by China Banking and Insurance
Regulatory Commission (CBIRC) on Wednesday. The objective of the campaign is to
prevent banks from using trusts as a channel to bypass regulation, and the
outstanding amount of trust funded by banks has fallen CNY561.9 billion, or
4.6%, from the beginning of the year, the report said. The CBIRC said the
regulation will continue to be strong to make the trust industry comply to new
asset management regulation rules, the report said.
--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com
--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com
[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]

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