MNI China Daily Summary: Thursday, September 28

     TOPS NEWS: U.S. Secretary of State Rex Tillerson is visiting China this

week at the request of Chinese Foreign Minister Wang Yi, according to the

Ministry of Foreign Affairs website. Tillerson and Wang will discuss Sino-U.S.

relations, U.S. President Donald Trump's visit to China later this year, and

major international and regional issues, the ministry said. The U.S. State

Department said Tillerson would arrive in China on Thursday for a three-day

visit. 

     TOP NEWS: Any rate hike by the U.S. Federal Reserve later this year is

unlikely to push the People's Bank of China into hiking its money market rates

because of the harm tighter monetary policy would do to the Chinese economy. As

in June, the PBOC is unlikely to follow any Fed rate hike in coming months with

one of its own, for a number of reasons, including that China's growth is

slowing; a rate hike could cause higher funding costs for companies; and the

PBOC may want to maintain market stability as stricter regulations take effect. 

     POLICY: Local governments must look beyond administrative curbs on housing

prices solely to enhance their political standing with the central government

and enact forward-looking development solutions to meet expected housing demand

in the future, an expert on China's housing market said Wednesday. The latest

round of local government housing control policies are focused on currying favor

with the central government ahead of the Communist Party Congress that starts

Oct. 18 and may have only a limited impact, the expert said.

     DATA: China's net revenue from goods and service trade stood at $17.1

billion in August, resulting from revenue of $206.5 billion and spending of

$189.4 billion, the State Administration of Foreign Exchange announced

Wednesday. For the goods trade alone, revenues were $188.7 billion, while

expenses were $147 billion, leading to a surplus of $41.7 billion. The service

trade had a net revenue deficit of $24.6 billion, on revenues of $17.8 billion

and expenses of $42.4 billion.

     DATA: China's banking sector reported net foreign liabilities of $179.1

billion as of the end of June, with total liabilities to overseas institutions

of $1.1485 trillion, offset by total outbound investment in financial assets of

$969.4 billion, the State Administration of Foreign Exchange said Wednesday.

Some 49%, or $478.6 billion, of Chinese banks' outbound investment in financial

assets was allocated to foreign banks, and the other 51%, or $490.8 billion, was

invested in foreign non-bank institutions.

     RATES: Money market rates were mixed on Thursday after the PBOC injected a

net CNY70 billion via open-market operations. The seven-day repo average was

last at 2.9646%, down from Wednesday's average of 3.1177%. The overnight repo

average was at 2.9343%, compared with Wednesday's 2.8970%.

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

Bank of China set a weaker daily fixing. The yuan was last at 6.6671 against the

U.S. unit, dropping .48% compared with the official closing price of 6.6350 on

Wednesday. The People's Bank of China set the yuan central parity rate against

the U.S. dollar at 6.6285 on Thursday, modestly weaker than Wednesday's 6.6192.

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

3.5596%, down from the previous close of 3.5767%, according to Wind, a financial

data provider.

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

metal mining sectors. The benchmark Shanghai Composite Index close down 0.17% at

3,339.64. Hong Kong's Hang Seng Index was 0.30% lower at 27,560.09. 

     FROM THE PRESS: As the week-long National Day holiday approaches, liquidity

seems to be tightening, with treasury bond repurchase rates rising rapidly, the

21st Century Business Herald reported Thursday. Analysts told the newspaper the

rise in yields was partly due to seasonal factors. Banks face the PBOC's

Macro-Prudential Assessment at the end of September, so they have dressed up

their books by reducing their financing to non-bank institutions, which has

caused repurchase costs to edge up, the report said. Additionally, given the

recent slowdown seen in China's economic data as well as the imposition of

stricter government controls on the property sector, the market is more

optimistic about the bond market outlook, increasing the demand from non-bank

financial institutions for financing as they boost their bond investments add

leverage, analysts told the newspaper. (21st Century Business Herald)

     Local government debt issuance this year reached CNY3.53 trillion as of

Sept. 27, the China Securities Journal reported Thursday. According to a report

by China International Capital Corporation, around CNY4.88 trillion in local

government debt is expected to be issued this year, so CNY1.3 trillion remains

to be issued the rest of the year, or around CNY450 billion on average every

month, according to the newspaper. As a large amount of local government debt

swaps have been issued in the past three years and only CNY1 trillion to CNY1.5

trillion of such swaps are left for 2018, debt pressure on local governments

will be reduced, the report said. (China Securities Journal)

     Under the Chinese government's campaign to encourage innovation and

entrepreneurship, financial technology (FinTech) has became an important sector

regulators want to encourage and improve, the Economic Information Daily

reported Thursday. A number of policies from both the central and local

governments aimed at supporting FinTech have been issued in the past 30 days,

like allowing FinTech companies to use alternative collateral, such as

intellectual property, to back financing, the report said. (Economic Information

Daily)

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

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

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