MNI China Daily Summary: Thursday, November 7

     POLICY: China and the U.S. have agreed to remove tariffs imposed from the

start of the current trade dispute in a phased approach, Chinese Ministry of

Commerce spokesman Gao Feng said at a briefing on Thursday. A phase-one deal is

conditional on the removal of some tariffs proportionate to the scope of the

agreement, he said. 

     DATA: China's October FX reserves rose for the third month to $3.1052

trillion, up from $3.0924 trillion in September, data released by the State

Administration of Foreign Exchange (SAFE) showed. The increase was mainly due to

exchange rate and asset price fluctuations given the declining dollar index and

falling prices of major government bonds, according to SAFE. The yuan gain 1.44%

against the U.S. dollar in October, Wind data showed. 

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

for the second day, leaving liquidity unchanged, according to Wind Information.

The total liquidity in the banking system is relatively high, PBOC said. 

     RATES: The seven-day weighted average interbank repo rate for depository

institutions (DR007) increased to 2.4557% from Wednesday's close of 2.3639%,

Wind Information showed. The overnight repo average rose to 1.9025% from

Wednesday's 1.7822%. 

     YUAN: The yuan strengthened to 6.9880 against the dollar from Wednesday's

close of 6.9987. PBOC set the dollar-yuan central parity rate stronger for a

second day at 7.0008, compared with Wednesday's 7.0080.

     YUAN: Chinese regulators should continue to relax restrictions to promote

the internationalization of the yuan, China Business News reported citing Huo

Yingli, the director of macro-prudential management bureau at PBOC. The central

bank has shortened the time needed for foreign investors to enter the Chinese

market, improved policy transparency, clarified tax payment arrangements and

introduced overseas rating agencies, said Huo.

     BONDS: The yield on 10-year China Government Bond was last at 3.2675%, up

from the close of 3.2500% on Wednesday, according to Wind Information.

     STOCKS: The benchmark Shanghai Composite Index was little changed from

yesterday, closing at 2,978.71. Blockchain and pork shares traded actively,

while defence and rare earth stocks showed weakness. Hong Kong's Hang Seng Index

edged up 0.57% to 27,847.23.

     FROM THE PRESS: China's yuan internationalization will play an important

role in the development of Free Trade Zones, China Securities Journal reported

citing Chen Yulu, a deputy governor of PBOC. The internationalization of the

yuan will insist on serving the real economy and facilitating trade and

investment, and the currency was an independent choice for market participants,

Chen emphasized.

     China should further reform small and medium-sized banks to enhance their

contribution to the real economy, the Securities Times reported citing a meeting

of the State Council Financial Stability and Development Committee on Wednesday.

The current focus is to support small banks replenishing capital, optimizing

capital structure and improving risk management, the newspaper said citing the

committee.

     China's successful sale of EUR4 billion sovereign bonds in Paris on Nov 5

showed the world's confidence in China's economic prospect, Xinhua News Agency

said in a commentary. The euro bond sale, China's first in 15 years, showed that

investors consider China a valuable market amid global slowdown and its

financial products are safe investment, Xinhua said.

--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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