MNI China Daily Summary: Thursday, October 19

     TOP NEWS: China's economy grew at a slightly weaker pace in the third

quarter, with real GDP rising 6.8% from a year earlier, the National Bureau of

Statistics said Thursday. The result was in line with the 6.8% median estimate

in a Market News International Survey of 15 economists and the 6.9% GDP growth

seen in each of the first two quarters this year. Both industrial production and

retail sales data for September were above market expectations, suggesting the

economy was gaining momentum at the end of the third quarter. However,

fixed-asset investment was slightly lower than estimates. Industrial output

increased 6.6% y/y in September, above the median estimate in the Market News

survey for a gain of 6.5% y/y. Retail sales in nominal terms rose by 10.3% y/y

in September, compared with 10.1% growth in August and 10.7% a year earlier. The

median estimate in the Market News survey was for a gain of 10.1%. Fixed-asset

investment for the January-September period increased by 7.5% y/y, compared with

a gain of 7.8% for the first eight months of 2017. The January-September result

was below the MNI survey median expectation for a 7.8% gain.

     TOP NEWS: The foreign-exchange purchase position of the People's Bank of

China rose in September for the first time since October 2015, reflecting

limited intervention by the PBOC in the natural flow of forex supply and demand.

The PBOC's foreign-exchange position rose CNY850 million to CNY21.511 trillion

in September, compared with a decrease of CNY821 million in August, according to

data from the PBOC released on Thursday. The forex purchase position is viewed

as an indicator of Chinese capital flows. The larger the increase, the larger

capital inflows are seen to be, while the reverse is also true.

     LIQUIDITY: The People's Bank of China injected CNY80 billion in seven-day

reverse repos and CNY60 billion in 14-day reverse repos via open-market

operations. This resulted in a net injection of CNY100 billion for the day, as a

total of CNY40 billion in reverse repos matured on Thursday. It was the third

consecutive trading day that the PBOC has injected liquidity into the banking

system. The CFETS-ICAP money-market sentiment index ended at 42 on Wednesday, up

slightly from 41 at Tuesday's close. The lower the reading, the better the

liquidity conditions in the interbank market.

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

at 2.8513%, lower than Wednesday's average of 2.8711%. The overnight repo

average was at 2.5620%, also lower than Wednesday's 2.5764%.

     YUAN: The yuan fell against the U.S. dollar on Thursday morning after the

People's Bank of China set a weaker fixing for the day. The yuan was last at

6.6220 against the U.S. unit, weaker than the official closing price of 6.6205

on Thursday. It dropped to as low as 6.6390 in daily trade, the weakest level

since Sept. 29, when it hit 6.6842. The People's Bank of China set the yuan

central parity rate against the U.S. dollar at 6.6093 on Thursday, weaker than

Wednesday's 6.5991. The PBOC has set the fixing weaker for three straight

trading days.

     BONDS: The yield on benchmark 10-year China government bonds in the

secondary market was last at 3.7150%, down from the previous close of 3.73%,

according to Wind, a financial data provider.

     STOCKS: Stocks were lower, dragged down by the steel and coal sectors. The

benchmark Shanghai Composite Index closed 0.34% lower at 3,370.17. Hong Kong's

Hang Seng Index was 0.82% lower at 28,473.87.

     FROM THE PRESS: China's major challenge is the imbalance of people's desire

for a good life and the country's lack of development, the Economic Information

Daily said in a front-page commentary on Thursday. The country needs to change

its development methods, optimize the economic structure and transform growth

momentum, the newspaper argued. The newspaper spoke highly of the new

development plan and guidelines presented by the Chinese Communist Party

leadership under President Xi Jinping, noting that China's development needs to

be innovative, coordinated, green, open and shared. (Economic Information Daily)

     The property market is stable, though consolidation in the sector is

increasing, the Economic Information Daily, a newspaper under the official

Xinhua News Agency, reported Thursday. A property developer was quoted as saying

his company prefers to acquire more land through acquisitions instead of bidding

a high price for new land in the market. The newspaper also cited unidentified

experts as saying small- to medium-size property developers are widely facing

pressure because they are short on money, so larger property companies are in

position to acquire them. (Economic Information Daily)

     Bond market fluctuations are easing due to the positive trend in sentiment

on China's economic outlook for the rest of the year and liquidity injections by

the central bank, the China Securities Journal reported Thursday. The People's

Bank of China has conducted injections via reverse repos and its Medium-term

Lending Facility, stabilizing liquidity on the loose side to ease pressure in

the bond market. Analysts and experts are divided over the market outlook

because of uncertainties and risks, the newspaper noted. (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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