Trial now
PIPELINE

JP Morgan Joins Issuance List

GILTS

Aug 10 Auction Size Announced

     EXCLUSIVE: The cancellation of the APEC summit next month in Chile may not
derail the apparent progress in trade talks between China and the U.S., as the
two countries could still sign an initial agreement elsewhere, Chinese advisors
close to the government told MNI. "Both sides will continue to work with each
other, and will consider another location for signing the agreement," said Wei
Jianguo, a former vice minister of Commerce. The cancellation won't affect the
deal signing, he said in an interview on Thursday.
     TRADE: The U.S. may choose to make further tariff exemptions as it moves to
defuse its trade dispute with China, a former senior advisor to the People's
Bank of China (PBOC) told MNI. In two rounds, the U.S has so far excluded a
total of USD12.12 billion worth of goods from tariffs it imposed on USD50
billion of imports from China, according to China Academy of Social Sciences
(CASS), China's top official think tank. U.S. President Donald Trump may
calculate that it is politically more expedient to grant further such exemptions
than to be seen to be rolling back the tariffs aimed at Beijing, said Yu
Yongding, a senior fellow of the CASS and a former member of PBOC's monetary
policy committee.
     POLICY: China needs to boost public infrastructure investment to keep
economic growth at 6.5%-7% a year, and PBOC should back up this more
expansionary fiscal policy with rate cuts, a former senior advisor to PBOC told
MNI. "Expansionary fiscal policy combined with proper monetary policy is a
precondition to help establish a bottom for economic growth," said CASS
researcher Yu Yongding. The central government has ample room to increase
spending and even expand borrowing in excess of the targeted fiscal deficit
ratio of less than 3% of gross domestic product, he said, noting that China's
fiscal position is still relatively strong and the country has large state-owned
net assets.
     DATA: China's Purchasing Manager Index (PMI) edged down to 49.3 in October
from September's 49.8, according to data released by the National Bureau of
Statistics today. The index was in the contractionary zone below 50 for the
sixth straight month. 
     LIQUIDITY: PBOC skipped open market operations for the fourth day, draining
net CNY60 billion liquidity with the same amount of reverse repos maturing
today, according to Wind Information. The total liquidity in the banking system
is reasonable and ample, PBOC said.
     RATES: The seven-day weighted average interbank repo rate for depository
institutions (DR007) increased to 2.6962% from Wednesday's close of 2.6914%,
Wind Information showed. The overnight repo average rose to 2.5951% from
Wednesday's 2.2994%. 
     YUAN: The yuan strengthened to 7.0350 against the dollar from Wednesday's
close of 7.0584, rising 0.38%, the largest daily gain in half a month. The PBOC
set the dollar-yuan central parity rate firmer for a third trading day at
7.0533, compared with previous 7.0582. 
     BONDS: The yield on 10-year China Government Bond was last at 3.2775%, down
from the close of 3.3025% on Wednesday, according to Wind Information.
     STOCKS: The benchmark Shanghai Composite Index slipped 0.35% to 2,929.06,
as investors worried that Chile's APEC cancellation may raise new hurdle for
China-U.S. trade deal. Hong Kong's Hang Seng Index advanced 0.90% to 26,906.72.
     FROM THE PRESS: PBOC may cut interest rates as early as the first quarter
next year, said Ming Ming, the chief analyst at CITIC Securities in a report,
noting that Chinese monetary policy has not been completely decoupled with that
of the U.S. and PBOC's easing has only been postponed. The Federal Reserve is
expected to cut rates again early next year, even if it suspends the rate cut in
December, said Ming.
     China's local governments should use more direct financing tools including
medium-term notes to support the construction of city clusters in the Yangtze
River Delta and Xiong'an New Area, said Securities Daily in a commentary on
Thursday. Funding from fiscal budget and bank loans is insufficient, the
newspaper 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
[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]