MNI China Daily Summary: Thursday, September 6

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

on Thursday, citing "reasonable and ample" liquidity. With no maturing reverse

repos, there is no change in the liquidity position Thursday, according to Wind

Information. A total CNY176.5 billion in one-year MLFs mature this week.

CFETS-ICAP money-market sentiment index closed at 43 on Wednesday, up from 29 on

Tuesday.

     YUAN: The yuan fell slightly to 6.8385 against the dollar from Wednesday's

closing of 6.8381. Earlier today, the PBOC set the yuan central parity rate at

6.8217 on Thursday, stronger than Wednesday's 6.8266.

     MONEY MARKET RATES: The benchmark seven-day deposit repo average rose to

2.5999% on Thursday from 2.3943% yesterday, while overnight average jumped to

2.4894% from 2.1499%: Wind Information.

     BONDS: The yield on the benchmark 10-year China Government Bond was last at

3.6200%, unchanged from Wednesday's close, according to Wind Information.

     STOCKS: The Shanghai Composite Index closed 0.47% lower at 2,691.59. Hong

Kong's Hang Seng Index declined 1.27% to 26,897.33.

     FROM THE PRESS: China should steadily push the market-based reform of its

foreign exchange forming mechanism and not rush to realize the free floating of

the yuan, China Securities Journal reported. China should reduce direct

interventions in the FX market and match the rate of reform with the speed of

overall opening up, said Xie Fuzhan, head of Chinese Academy of Social Sciences.

A free-floating currency isn't realistic or ideal, while floating based on

certain management is realistic, the journal said citing Ding Zhijie, deputy

head of University of International Business and Economics.

     Inflation in China will likely remain benign in the near term, given

softening demand in a slowing economy, the Economic Information Daily said in a

commentary. Policy makers will want to avoid flooding the market with liquidity

while pushing to contain local government debt, keeping consumer prices capped.

M1 growth has been slower than M2 for six months, meaning inflation isn't likely

to spike, the daily said.

     China's local governments can ease policies for reducing property

inventories in their regions given the need to boost overall economic growth,

the Securities Daily reported. July's Politburo Meeting and meetings held by the

housing ministry in August didn't mention property inventory reduction, the

newspaper said, adding that inventory reduction programs have had some success.

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

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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