MNI China Daily Summary: Thursday, May 3

     TOP NEWS: The U.S. trade delegation, led by Treasury Secretary Steven

Mnuchin, arrived in Beijing on Thursday, and will discuss trade matters with the

Chinese government today and Friday. Chinese state media said China will not

tolerate the U.S. forcing Beijing to make a deal.

     LIQUIDITY: The PBOC injected CNY50 billion in 7-day reverse repos Thursday,

with the rate unchanged at 2.55%, the central bank said on its website. This

resulted in a net drain of CNY70 billion as a total of CNY120 billion reverse

repos matured today. CFETS-ICAP's money-market sentiment index closed at 43 on

Wednesday, up from 38 on Saturday. 

     MONEY MARKET RATES: The 7-day repo average rate fell to 2.8064% from the

2.9455% on Thursday, after the PBOC's net drain of CNY70 billion via its

open-market operations. The overnight repo average dropped to 2.6383% from

Thursday's 2.7080%.

     YUAN: The yuan fell against the U.S. dollar after the PBOC set a weaker

daily fixing. The yuan fell to 6.3631 against the U.S. unit, compared with the

official closing price of 6.3602 yesterday. The PBOC set the yuan central parity

rate at 6.3732 Thursday, weaker than Wednesday's 6.3670. The central bank has

set the fixing weaker for four trading days in a row.

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

3.6400%, down from the previous close of 3.6800%, according to Wind Information.

     STOCKS: Shares rose in by Shanghai, led by securities companies on news of

China's further opening up the securities sector, with Dongxing Securities up by

more than 6%. The benchmark Shanghai Composite Index closed 0.64% higher at

3,100.86. Hong Kong's Hang Seng Index declined 1.26% to 30,335.59.

     FROM THE PRESS: China's stance regarding trade negotiations with the U.S.

remains unchanged: it is open to negotiation, but will fight back if the U.S.

insists on starting a trade war, the official Xinhua News Agency said in a

commentary piece. It is good that the U.S. is sending representatives to

negotiate with Beijing, but they should be sincere and principled, and should

obey international rules, Xinhua said. The U.S. should not demand too much or

force China to make deals; negotiations should be equal and reciprocal, Xinhua

said. 

     The yuan is likely to further weaken if the dollar's rally continues, China

Securities Journal reported. The yuan's depreciation after the Labor Day holiday

is a reaction to the dollar's rise over the holiday, said the Journal. The

dollar strengthening was due to the Fed's optimism about the U.S. economic

outlook and inflation, while the euro's relatively weakness can be credited to

the European Central Bank's neutral tone in its April meeting, noted the

Journal, citing unidentified market participants.

     The finalized WMP rules will benefit private equities and will increase

banks' business cooperation with private equities, Security Daily reported.

Previously, private equities were not allowed to cooperate with banks, and they

had to do that through other opaque channels. The finalized WMP rules allow

off-budget capital from banks to be invested in private equities, the Daily

said. The rules also encourage the innovative development of private equities,

the newspaper said.

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

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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