MNI China Daily Summary: Thursday, Sept. 21

     TOP NEWS: Local governments are tightening regulations to prevent the

illegal use of consumer loans to finance house purchases, the Securities Daily

reported Thursday. Beijing, Guangzhou and Shenzhen cities and Jiangsu province

have announced new policies to prohibit consumer loans being used to buy houses

and have asked financial institutions to conduct self-examinations to stop such

practices. Short-term consumer loan growth has skyrocketed this year, in

contrast with the stable growth rate of retail sales, the newspaper noted.

According to E-House, a real estate consultancy, around CNY300 billion from

consumer loans was expected to flow into the property market, representing 30%

of total new short-term consumer loans, the report said. Fully 90% of short-term

consumer loans being used for housing has been issued in just six provinces:

Guangdong, Fujian, Suzhou, Shanghai, Sichuan and Hebei. The report said the new

regulations signal again that current policy controls on the property market

will be tightened further, with policies targeting specific segments of the

market to come. (Securities Daily)

     LIQUIDITY: The People's Bank of China injected CNY40 billion in seven-day

reverse repos and CNY20 billion in 28-day reverse repos via open-market

operations. This resulted in no net injection or drain of liquidity for the day,

as a total of CNY60 billion in reverse repos matured on Thursday. The CFETS-ICAP

money-market sentiment index ended at 44 on Wednesday, down from 48 at Tuesday's

close. The lower the reading, the better the liquidity conditions in the

interbank market.

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

at 2.9389%, lower than Wednesday's average of 2.9426%. The overnight repo

average was at 2.8289%, higher than Wednesday's 2.8133%.

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

China set the fixing rate weaker for the day. The yuan was last at 6.5918

against the U.S. unit, compared with the official closing price of 6.5742 on

Wednesday. The PBOC set the yuan central parity rate at 6.5867, 0.30% weaker

than Wednesday's 6.5670.

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

3.6005%, higher than the previous close of 3.5834%.

     STOCKS: Stocks fell, dragged lower by cyclical stocks. The benchmark

Shanghai Composite Index closed down 0.24% at 3,357.81. Hong Kong's Hang Seng

Index was 0.07% lower at 28,107.87.

     FROM THE PRESS: China is accelerating preparations to fully implement the

reduced negative list of areas of the economy in which foreign entities are not

allowed to invest and plans to implement the list starting Jan. 1, the Economic

Information Daily reported Thursday. The first pilot regions in which the list

will be implemented have already entered a "summary stage" and 11 more areas,

including Hubei and Zhejiang, are expected to become new pilot regions in a

second round. (Economic Information Daily)

     The Beijing Municipal Commission of Housing and Urban-Rural Development has

announced it will add around 50,000 "shared property rights houses" into the

market, the Securities Daily said in a front-page report. The Beijing government

has issued a new policy on such housing units, which are homes whose ownership

is shared between the government and inhabitants, but at a lower price because

the government gives up parts of its land revenue income. The new policy will

take effect starting Sept. 30. Officials from the commission said a total of

around 250,000 "shared property rights houses" would be added to the housing

market in the period ahead, according to the newspaper. (Securities Daily)

     Negotiable certificates of deposit (NCDs) have been transformed from

investment vehicles into liquidity tools for the market, the 21st Century

Business Herald reported Thursday. As the end of the third quarter approaches,

money supply is tight though even though the People's Bank of China  has

enhanced its liquidity injections, perhaps due to the large volume of NCDs

maturing this month, the report said. Insiders told the newspaper that banks

have much less motivation to issue NCDs compared with six months ago, largely

due to the tightening of regulations. Although the ratio of NCDs to total bank

liabilities had risen to 5% y/y at the end of July, higher than the 3.5% in the

same period last year, it does not mean a deterioration of banks' liability

structure, the report said. (21st Century Business Herald)

--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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