MNI China Daily Summary: Thursday, November 15

     TOP NEWS: The yuan will probably fluctuate around its current level in the

near term, but could weaken further if the dollar index rises or if a

much-anticipated summit between the Chinese and U.S. leaders fails to make

progress towards resolving a trade dispute, a government advisor told MNI in an

interview. "The yuan could likely stay under the key psychological 7 level for

now, as the authorities are concerned about financial markets as the domestic

equity market has just started to recover from a big fall," said Zhang Ming, a

senior fellow at the Institute of World Economics and Politics under the Chinese

Academy of Social Sciences. Letting the currency break 7 may trigger a sell-off

of risk assets and the equity market could fall sharply, something the central

bank will want to prevent, he said.(See full story:

https://www.marketnews.com/node/1836221)

     POLICY: China and U.S. officials have engaged in high-level talks on the

economy and trade following a telephone call between the two nations' presidents

on Nov 1, the Ministry of Commerce said. Working teams from the two nations are

closely contacting each other, spokesman Gao Feng told reporters on

Thursday.(See full story: https://www.marketnews.com/node/1836566)

     DATA: The average price of new homes in 70 major cities, excluding

subsidized units, increased 9.7% y/y in October, accelerating from an 8.9% gain

in September, marking the biggest rise in recent 17 months, according to MNI

calculations. On a monthly basis, average prices for 70 major cities rose 1.0%,

unchanged from September.

     LIQUIDITY: The People's Bank of China(PBOC) skipped open market operations

(OMOs) on Thursday, leaving liquidity slightly tighter, as CNY120 billion of

Treasury cash deposits at commercial banks matured. No reverse repos mature

today, according to Wind Information. The central bank said the total liquidity

in the banking system has declined due to the taxation period, the maturing of

Treasury cash deposits at commercial banks and other factors, but was still at a

reasonable and ample level.

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

institutions (DR007) decreased to 2.5753% from Wednesday's close of 2.6144%,

Wind Information showed. The overnight repo average increased to 2.3362% from

Wednesday's 2.3132%.

     YUAN: The yuan closed at 6.9348 against the U.S. dollar from Wednesday's

close of 6.9509. The PBOC set the yuan central parity rate at 6.9392 on

Thursday, picking up from Wednesday's 6.9402.

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

3.3900%, down from the closing price of 3.4150% on Wednesday, according to Wind

Information.

     STOCKS: The benchmark Shanghai Composite Index closed 1.36% higher at

2,668.17. Hong Kong's Hang Seng Index increased 1.75% to 26,103.34.

     FROM THE PRESS: The Ministry of Commerce will remove administration fees,

promote export tax rebates and trade financing to help boost private

enterprises, the People's Daily said Thursday, citing Zhong Shan, the Commerce

Minister. The Ministry will also encourage private companies to take part in the

Import Export, Canton Fair and overseas exhibitions, and to develop inside the

pilot Free Trade Zone and other economic and trade cooperation zones abroad, the

Daily said citing Zhong. Private enterprises contribute 90% of domestic trade,

48% of foreign exports, and 49% of foreign investment, Zhong said, expecting

private companies to play a bigger role in boosting consumption and expanding

foreign trade. (Link to the story: https://bit.ly/2FpX39X)

     The slowdown in China's October money supply and credit growth is mainly

due to banks' unwillingness to increase credit and not a fault of monetary

policy, the Securities Times said in a front-page commentary Thursday. Banks

still have a low appetite for risk amid the economic downturn, and are hindered

by factors like the slowdown of deposit growth, insufficient capital, pressure

on asset quality and fear of regulations, the newspaper said. (Link to the

story: https://bit.ly/2PYQuPP)

     Foreign banks replaced Chinese banks as the main lenders in Shanghai in

October, The Paper said late Wednesday, citing data released by the central

bank's Shanghai branch. Loans held by Chinese banks contracted by CNY7.439

billion, a decline of CNY52.039 billion compared with the same figure for

October 2017. Loans by foreign banks expanded by CNY27.977 billion, a rise of

22.987 billion y/y. (Link to the story: https://bit.ly/2DHiQIL)

--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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