MNI China Daily Summary: Tuesday, August 1

     TOPS NEWS: Tighter regulations for the banking sector are likely to

continue to be implemented during the second half of the year, as the China

Banking Regulatory Commission said in its half-year work summary published on

its website over the weekend, with the CBRC likely to coordinate with other

regulators to minimize market turbulence caused by the new regulatory measures.

Five significant risks worthy of regulators' attention include the potential

bounce-back to higher levels of non-performing assets, cross-industry financial

product risks, real estate market risks, hidden government debt risks, and

emerging financial activities risks, the CBRC said.

     TOP NEWS: With domestic financing for property developers tightening

real-estate companies' overseas bond issuance rebounded to a record in June and

July after cooling in May, Caixin reported late Monday. From Jan. 1 to July 25,

mainland property developers issued 60 bonds totaling CNY196.45 billion -- more

than in all of 2016, Caixin said, quoting Bloomberg data. The amount was CNY81.3

billion in June -- a single-month record. Unidentified property experts said the

wave of bond issuance overseas was a result of pressure on developers to repay

loans, diversify financing and policy guidance. But the news media has reported

the National Development and Reform Commission stopped approving property

developers' bond issuance overseas from the second quarter and the increase in

June may be from approvals received earlier. Therefore, the trend in issuance of

bonds by property companies for the rest of the year is unclear, it said.

(Caixin)

     DATA: The China Caixin manufacturing PMI rose to 51.1 in July from 50.4 in

June -- indicating a second consecutive month of expansion in the sector,

according to data compiled by IHS Markit for Caixin and released Tuesday. The

index was the highest since March when it was at 51.2. The improvement was led

by output and new orders, which both rose at their fastest pace in five months

as a result of an upturn in new export sales, Caixin said.

     RATES: Money market rates were mixed on Tuesday after the PBOC's injection

of CNY170 billion via its open-market operations resulted in a zero net

injection, after CNY170 billion in seven- and 14-day reverse repos matured. The

seven-day repo average was last at 2.9280%, up from Monday's average of 2.8025%.

The overnight repo average was at 2.8078%, compared with Monday's 2.8463%.

     YUAN: The yuan rose against the U.S. dollar Tuesday after the People's Bank

of China set a stronger daily fixing. The yuan was last at 6.7179 against the

U.S. unit, compared with the official closing price of 6.7290 on Monday. The

People's Bank of China set the yuan central parity rate against the U.S. dollar

at 6.7148 Tuesday, modestly stronger than Monday's 6.7283. Tuesday's fixing was

the highest since 6.7098 on Oct. 11 last year.

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

3.7356%, down from the previous close of 3.8734%, according to Wind, a financial

data provider.

     STOCKS: Stocks rose, led higher by the insurance, banking and highway

transportation sectors. The benchmark Shanghai Composite Index closed 0.60%

higher at 3,292.64. Hong Kong's Hang Seng Index was 0.79% higher at 27,540.46.

     FROM THE PRESS: The yuan is expected to extend two-way fluctuations in the

short term and now is a good time for the range of exchange-rate movements to

increase, the China Securities Journal said Tuesday. As China's economic

fundamentals and cross-border capital flows improve -- and demand and supply in

the foreign-exchange market is balanced -- the yuan may continue two-way

fluctuations: which shows the trend of the yuan will likely be to appreciate

against the U.S. dollar, the newspaper said. The yuan won't continue to be

steady as it is now, unidentified analysts said in the report. While the

People's Bank of China has taken measures to stabilize the exchange rate,

marketization hasn't changed. The measures, including current pricing schemes,

are temporary tools providing a buffer period to allow time for the market to

adjust to increases in exchange-rate flexibility. But depreciation pressure on

the yuan continues, the newspaper said. (China Securities Journal)

     Market insiders said liquidity in August would be slightly better than in

July and overall it would return to a "neither loose nor tight" status, the

China Securities Journal said Tuesday. The People's Bank of China's open-market

operations in July ended with a net injection of CNY472.5 billion -- the fourth

consecutive month of net injection. Demand for money is strong at the end of the

month and market liquidity is tight, the newspaper said. Large amounts of

reverse repos maturing in August will also put pressure on liquidity. (China

Securities Journal)

     The People's Bank of China has examined banks and their interbank

certificate of deposit accounts, and ordered 40 banks to make related changes to

their interbank businesses, Caixin reported Tuesday. The banks range from large

state-owned banks to small banks, including branches of Agricultural Bank of

China, China Minsheng Bank, China Construction Bank, Bank of China, China

Merchants Bank, Pingan Bank, Bank of Nanjing, and Hengfeng Bank. The central

bank said that banks at the local level have a higher level of "illegal

practices" and lack awareness of potential risks, and that the banks'

examination processes in opening accounts are not strict enough, Caixin

reported. The PBOC gave the banks three to six months to resolve the problems,

during which they will be prohibited from conducting interbank account

businesses. (Caixin)

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

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

[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]