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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
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
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.
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