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Consolidation Mode But Remains Bearish


Fails To Hold Onto Thursday’s High


'Big Tech' Bill Goes To Senate


Oil Up For Fifth Week On Supply Disruption, Geopolitics

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     TOP NEWS: The main functions of China's foreign-exchange reserves are to
stabilize the currency's exchange rate and provide liquidity for the economy,
and not to make profits for the country, PBOC Counselor Sheng Songcheng said
during a closed-door meeting in Beijing. Some economists have criticized the
central bank's dual role in managing forex reserves and monetary policy, saying
it has resulted in excess liquidity and inflated prices of assets and consumer
goods, leading to low returns on locked-up wealth. Critics of the central bank
have also argued for a two-system structure: having the PBOC and Ministry of
Finance manage money together to prevent inflation and financial disorder. "This
viewpoint is a huge misunderstanding" of China's basic currency structure and
monetary policies, Sheng said.
     TOP NEWS: China's Ministry of Foreign Affairs on Wednesday dismissed a
recent U.S. Congressional report on bilateral economic relations as
"irresponsible comments" by a group with "long-held and deeply rooted biases"
against China. In its 2017 report released this month, the U.S.-China Economic
and Security Review Commission cited a long list of unfair practices by China,
including failing to uphold its obligations under the World Trade Organization,
discriminatory treatment of U.S. companies, predatory investment attempts into
critical U.S. industries, and cyber espionage. "Whether it's the U.S.
authorities or Chinese ministries, it would be sad if these conclusions from
such an agency were used as the basis for formulating policies," ministry
spokesman Lu Kang told reporters.
     LIQUIDITY: The PBOC announced Thursday that it injected CNY140 billion in
liquidity via seven-day reverse repos, CNY120 billion via 14-day reverse repos
and CNY10 billion via 63-day reverse repos, with rates unchanged at 2.45%, 2.60%
and 2.90%, respectively. The PBOC did not give further explanation about its
operations this morning. This resulted in a net injection of CNY100 billion for
the day, as a total of CNY170 billion in reverse repos matured on Thursday. A
total of CNY80 billion in treasury deposits also matured on Thursday.
     RATES: Money market rates fell Thursday. The seven-day repo average was
last at 2.8948%, compared with Wednesday's average of 2.8967%. The overnight
repo average was at 2.8029%, compared with Wednesday's 2.8312%.
     YUAN: The yuan rose against the U.S. dollar after the People's Bank of
China set the fixing rate much stronger for the day. The yuan was last at 6.5968
against the U.S. unit, compared with the official closing price of 6.6159 on
Wednesday. The PBOC set the yuan central parity rate at 6.6021, much stronger
than Wednesday's 6.6290. Today's fixing was the highest since Oct. 18, and was
the biggest rise since Oct. 11.
     BONDS: The yield on benchmark 10-year China government bonds was last at
4.00%, compared with the previous close of 4.02%.
     STOCKS: Stocks were down, led lower by the healthcare sector. The benchmark
Shanghai Composite Index closed down 2.29% at 3,351.92. Hong Kong's Hang Seng
Index was 0.61% lower at 29,821.11.
     FROM THE PRESS: A top official of the China Banking Regulatory Commission
has highlighted the risks posed by the accumulation of debt by local
governments, the Financial News, a newspaper of the People's Bank of China,
reported Wednesday on its website. The official, Yu Xuejun, who heads the
commission's regulatory board for key state-owned enterprises, told a forum in
Beijing on Wednesday that the continued swelling of the debt was a lingering
problem that could frustrate efforts to prevent financial risks. Increased local
government debt also makes it difficult for financial institutions to manage
liquidity conditions, Yu said. China's entire financial system needs to be more
market-based and internationalized to enhance efficiency, Yu argued, and
regulators need to clarify their supervision goals and actions so that
coordination is better and all the risks in the financial sector are addressed.
(Financial News)
     A deputy governor of the People's Bank of China has said that China needs
to deepen reforms in the financial technology, or fintech, sector and further
integrate finance and technology, the Financial News reported. The central
banker, Fan Yifei, told a conference Wednesday in Wuhan that the PBOC values the
development of fintech and that it would continue to facilitate innovation and
reform in the sector. He noted that some problems persist in the development of
the sector, such as small tech companies' difficulty in obtaining financing, the
inability to address risks well and the lack of improvement in infrastructure.
To tackle the risks, the government needs to guide, coordinate and support
fintech companies, with an assessment program to regulate companies' activities,
Fan said. (Financial News)
     The government has prohibited the establishing of any new financial
technology company providing payday loans and prohibited payday loan services
across provinces, districts or cities, the Financial News reported Thursday,
confirming speculation that a document with the rules had been issued Tuesday.
The newspaper cited an unidentified official as saying that under the tighter
policies, the volume of payday loans will drop significantly. Existing activity
in the sector is also being curtailed, the person said, as local governments
have started examining the risks of fintech companies involved in payday loans.
The People's Bank of China and the China Banking Regulatory Commission plan to
meet Thursday morning, and have asked local financial regulators to report on
payday loan businesses, the newspaper said. (Financial News)
     The Ministry of Finance has said it will issue CNY7 billion in
renminbi-denominated treasuries on Monday in Hong Kong, the Economic Information
Daily reported Thursday. After CNY7 billion in renminbi-denominated treasuries
were issued in the Hong Kong market on June 22, the total for the year will be
CNY14 billion. The treasuries are aimed at institutional investors, foreign
central banks and monetary management regulators, the newspaper said. (Economic
Information Daily)
     The land sales market is cooling down, although the scale of transactions
is still large, the 21st Century Business Herald reported Thursday. The slowdown
is reflected in a reduced premium rate for land prices, fewer bids and less
frequent breaking of the maximum price set by the government. The cooldown is
mainly in high-tier cities: at an auction on Nov. 3, one patch of land in
Beijing failed to sell, the first failure in almost two years, and two parcels
failed to sell in Guangzhou. The premium rate is about 19% in Tier 1 cities this
year, 48 percentage points lower than the rate of nearly 67% in 2016. Property
developers are increasingly acquiring land in Tier 3 and Tier 4 cities because
it is easier for them to recoup their investments. Experts say land sales in
those cities will not slow anytime soon, especially cities near larger hotspot
cities, unless strict regulations are put in place. (21st Century Business
--MNI Beijing Bureau; +86 (10) 8532-5998; email:
--MNI Beijing Bureau; +86 (10) 8532-5998; email:
[TOPICS: M$A$$$,M$Q$$$,MI$$$$,MBQ$$$]
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