MNI China Daily Summary: Thursday, November 2

     TOP NEWS: China and the United States plan on signing commercial agreements

during U.S. President Donald Trump's visit to China next week to open the way

for more imports of consumer goods, Vice Commerce Minister Fu Ziying said at a

press conference. Fu said the two countries plan to negotiate and reach

agreements on "some aspects" of economic and trade cooperation issues, with

China planning to lower tariffs on some consumer goods and encouraging banks to

expand import financing.

     TOP NEWS: China's Foreign Affairs Ministry said Thursday that U.S.

President Donald Trump will arrive in China next Wednesday for a three-day state

visit. The Foreign Affairs Ministry said Trump and Chinese President Xi Jinping

will "exchange in-depth views on China-U.S. relations and major global and

regional issues of common concern." Foreign Affairs Ministry spokesman Lu Kang

said in the press release that China wants to "achieve important results" from

the visit in order to inject a "new and strong impetus" into the relationship.

Ties have been strained over trade issues since Trump in August ordered an

investigation by the U.S. Trade Representative's Office into China's

intellectual property rights practices after years of complaints by U.S.

businesses that they were being forced to transfer technological know-how to

China as a condition of operating there. Trump is also expected to press Xi to

do more to contain North Korea's nuclear threat.

     TOP NEWS: The Hong Kong Monetary Authority (HKMA) announced Thursday on its

website that the list of eligible collateral for its Renminbi Liquidity Facility

will be expanded to include U.S. dollar-denominated bonds issued in Hong Kong

last week by China's Ministry of Finance. The total issuance size was $2

billion, including $1 billion of five-year bonds and $1 billion of 10-year

bonds. The new arrangement will take effect from today, the HKMA statement said.

     LIQUIDITY: The People's Bank of China skipped open-market operations on

Thursday, explaining that high fiscal spending last month had kept banking

system liquidity at a relatively high level that could absorb the impact of

maturing reverse repos. The lack of OMOs today resulted in a net drain of CNY140

billion for the day, as a total of CNY140 billion in reverse repos matured. This

was the first trading day that the PBOC has skipped open-market operations since

Oct. 13.

     RATES: Money market rates were mixed. The seven-day repo average was last

at 2.8431%, lower than Wednesday's average of 2.9402%. The overnight repo

average was at 2.5717%, higher than Wednesday's 2.5000%.

     YUAN: The yuan rose against the U.S. dollar after the People's Bank of

China set a stronger fixing for the day. The yuan was last at 6.6013 against the

U.S. unit, stronger than the official closing price of 6.6161 on Wednesday. The

yuan rose as high as 6.5827 in interday trading, the strongest since Oct 16. The

People's Bank of China set the yuan central parity rate against the U.S. dollar

at 6.6196 on Thursday, much stronger than Wednesday's 6.6300. It was the third

straight trading day of stronger fixings.

     BONDS: The yield on benchmark 10-year China government bonds was last at

3.8650%, even with the previous close of 3.8650%, according to Wind, a financial

data provider.

     STOCKS: Stocks were lower, dragged down by the electric car manufacturing

sector. The benchmark Shanghai Composite Index closed 0.37% lower at 3,383.31.

Hong Kong's Hang Seng Index was 0.03% higher at 28,603.39.

     FROM THE PRESS: Reform of the regulatory system is the top priority in

China's ongoing financial reforms, so coordination of financial regulation needs

to be enhanced, the Financial News, a journal run by the People's Bank of China,

said in a front-page commentary on Thursday. Problems in the financial sector,

including debt defaults, non-performing asset risks, property bubbles as well as

local government debt risks, have been caused in part by insufficient and

uncoordinated regulation, the commentary argued. Regulators need to crack down

further on financial problems and clean up the market environment, the

commentary said. (Financial News)

     Asset-backed securitization (ABS) has become a focus for banks since

interbank transactions have shrunk due to stricter regulation, Caixin reported

Thursday. Non-performing asset-backed securities are preferred by small- and

medium-size banks to help them meet the capital adequacy ratio (CAR) requirement

for their macro-prudential assessments (MPA) by the People's Bank of China, the

report said. Banks can reuse their inventory of assets via ABS issues and also

invest in various assets in the market, the report noted. (Caixin)

     Property companies are expected to suffer more serious funding difficulties

in the fourth quarter as regulators continue to curb their funding channels, the

Economic Information Daily reported Thursday. As bank loans to the property

sector have been restricted, the companies have turned to entrusted capital,

which has higher costs, the report said. Considering that regulations will

tighten further, banks have used up most of their credit quotas and property

sales have been sluggish, property companies face a "cold winter" for the rest

of this year, the report warned. (Economic Information Daily)

     Chinese authorities are mulling measures involving tax policy, financial

support and pricing systems to tighten regulation of public-private partnerships

(PPPs), the Shanghai Securities News reported Thursday. Since 2014, PPPs have

expanded rapidly to a volume of over CNY1 trillion, but the expansion includes

invisible risks, particularly when PPPs are used as vehicles for local

government borrowing, the report warned. These unqualified projects will be

stricken from the approved PPP list compiled by the Ministry of Finance, the

report said, citing ministry officials. (Shanghai Securities News)

     Asset-backed securitizations of public-private partnerships should not

become a tool for leveraging and borrowing, Zeng Hui, a Financial Markets

Department official at the People's Bank of China, said Thursday in Shanghai

during a financial forum, Caixin reported. Asset-backed securitizations of PPPs

should serve the real economy and not just circulate inside the financial

system, Zeng noted. The priority in offering asset-backed securitization

products is to prevent risks, and the relevant transactions must be in line with

the requirements and guidelines of macroeconomic policies, Zeng stressed.

(Caixin)

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

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

[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]