MNI China Daily Summary: Thursday, November 30

     TOP NEWS: China's official purchasing managers' index for manufacturing,

jointly released by the China Federation of Logistics and Purchasing (CFLP) and

the National Bureau of Statistics (NBS), rose to 51.8 in November from 51.6 in

October. The November reading was the second highest this year after the 52.4

reading in September and matched the 51.8 reading in March. Sentiment rose more

than expected, with the MNI survey median forecast calling for an unchanged

result of 51.6. The November reading means that activity in the Chinese

manufacturing sector continued to rise, but at a faster pace than the month

before. It was the 16th consecutive month that the reading has been above 50,

the break-even mark.

     TOP NEWS: Chinese President Xi Jinping told U.S. President Donald Trump in

a phone conversation Wednesday night that China's "unswerving goal" is to

denuclearize the Korean Peninsula and preserve peace and stability in the

region, Xinhua News Agency reported Thursday. The call came after North Korea's

test launch this week of a ballistic missile that the United States military

said could reach anywhere on the U.S. mainland. The U.S. military said previous

North Korea tests proved its missiles could hit as far away as Alaska or Hawaii.

Trump responded to the latest test by saying the U.S. would impose "additional

major sanctions" on Pyongyang, without specifying what those sanctions would be.

He also said in a Twitter message that he had spoken with Xi about North Korea's

"provocative actions," adding that "This situation will be handled!"

     RATES: Money market rates rose. The seven-day repo average was last at

2.9316%, higher than Wednesday's average of 2.9267%. The overnight repo average

was at 2.8327%, higher than Wednesday's 2.6164%.

     LIQUIDITY: The People's Bank of China injected CNY150 billion in seven-day

reverse repos, CNY120 billion in 14-day reverse repos and CNY10 billion in

63-day reverse repos via open-market operations. This resulted in a net zero

injection/drain for the day, as a total of CNY280 billion in reverse repos

matured on Thursday. It was the fourth straight trading day of net zero

injection/drain.

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

China set a weaker daily fixing. The yuan was last at 6.6034 against the U.S.

unit, compared with the official closing price of 6.5988 on Wednesday. The PBOC

set the yuan central parity rate against the U.S. dollar at 6.6034 on Thursday,

slightly weaker than Wednesday's 6.6011. The PBOC has set the fixing weaker for

four consecutive trading days.

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

3.9050%, up from the previous close of 3.9000%, according to Wind, a financial

data provider.

     STOCKS: Stocks were down, led lower by the property agency and insurance

sectors. The benchmark Shanghai Composite Index closed down 0.62% at 3,317.19.

Hong Kong's Hang Seng Index was 1.53% lower at 29,171.80.

     FROM THE PRESS: The government's deleveraging campaign has made progress

and leverage ratios continue to fall in the financial and non-financial sectors,

but reducing the debt of state-owned enterprises (SOEs) is still the top

priority of the deleveraging effort, the Financial News, a journal run by the

People's Bank of China, reported Thursday on its front page. Deleveraging of big

SOEs has increased the pressure to deal with financial institutions'

non-performing loans and could trigger debt payment risks, the report warned,

citing analysts. Debt-for-equity swaps should be emphasized, the report argued,

noting that as of the end of September, 77 companies, mainly big SOEs, had

signed a total of CNY1.3 trillion in debt-for-equity swaps agreements, the

report said. (Financial News)

     The establishment of new private-sector banks in China has almost stalled

because regulators have raised the bar for approval and the capacity of new

institutions to attract deposits is weak, the 21st Century Business Herald

reported Thursday. Since 2014, 17 private banks have been approved, but they

rely heavily on interbank transactions because their deposit products have

attracted few clients, the report said. Given the ongoing financial deleveraging

campaign, this reliance is not sustainable, it said. Authorities have raised the

registered capital requirement for new banks to CNY2 billion, and the frequent

resignation of high-ranking executives at the new institutions has also weighed

on the sector, the report noted. (21st Century Business Herald)

     Other countries should be cautious about the spillover effects from "Trump

Economics," although a solid performance by the U.S economy could be a strong

engine for global growth, the Economic Information Daily said in a front page

commentary on Thursday. If the U.S makes significant tax cuts, other economies

should consider following suit to retain their competitiveness, the commentary

argued. The combination of U.S. monetary policy normalization and a large tax

reduction would push up U.S. public debt, forcing many emerging economies to

worry about the stability of their currencies and the security of their foreign

reserves, the commentary warned. (Economic Information Daily)

     Infrastructure investment is expected to slow further due to the

government's deleveraging and risk-prevention campaign, so improving consumption

will be the focus of efforts to stabilize growth, the China Securities Journal

reported Thursday. The infrastructure investment growth rate will drop to 14%

next year, in particular because regulators are tightening controls on

public-private partnership projects initiated by local governments, the report

noted. But if investment in the property and manufacturing sectors plunges, the

government is likely to boost infrastructure investment via fiscal spending to

offset the downward pressure on the economy, the report argued. (China

Securities Journal)

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

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

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