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     EXCLUSIVE: The arrest of Huawei CFO Meng Wanzhou has cast a shadow over
trade negotiations between China and the U.S., several experts advising the
Chinese government and former officials told MNI, with one warning that an angry
Chinese social media response could put pressure on Beijing to dig its heels in.
State media has shied away from linking Meng's arrest in Vancouver Dec 1 on a
U.S. arrest warrant to trade talks agreed after a meeting between presidents Xi
Jinping and Donald Trump at the G20 summit the same day, and a former Ministry
of Commerce official told MNI the Chinese government would not allow the case to
interfere with the negotiations. Instead, China would approach talks from a
legal and practical perspective, the former official said.
     TRADE WAR: China's Vice Premier Liu He, in charge of negotiations with the
U.S., has spoken to Treasury Secretary Steven Mnuchin and Trade Representative
Robert Lighthizer Tuesday, with the two sides exchanging views on the schedule
and roadmap of the trade consultations, as well as implementing the consensus
reached between Presidents Xi and Trump, the Ministry of Commerce said on its
website.
     POLICY: China's annual Central Economic Work Conference is expected to
start on Friday, Dec 14, a source close to the government told MNI. The
close-door meeting, chaired by the Communist Party General Secretary and
President Xi Jinping, will last four days through Monday, the source said. China
will hold a national celebration on Tuesday, Dec 18, marking the 40th
anniversary of China's reform and opening policy, the source also noted.
     DATA: M2 in November grew by 8% y/y, missing the MNI survey median of 8.1%
and stayed at October's level. Total social financing (TSF) surged to CNY1.52
trillion from CNY728.8 billion in October, compared with CNY1.43 trillion
projected by an MNI survey. The gain was mainly due to the smaller contraction
of shadow banking, the gain in corporate bonds, as well as lending to the real
economy. The amount of new loans were CNY1.25 trillion in November, compared
with CNY1.2 trillion projected by the MNI survey and CNY697 billion in October,
data released by the People's Bank of China (PBOC) showed.
     LIQUIDITY: The PBOC skipped open market operations (OMOs) for a 33rd
straight trading day Tuesday, leaving liquidity unchanged. No reverse repos
mature today, according to Wind Information. The central bank said the level of
liquidity in the banking system is at a reasonable and ample level.
     RATES: The 7-day weighted average interbank repo average rate for
depository institutions (DR007) increased to 2.5826% from Monday's close of
2.5174%, Wind Information showed. The overnight repo average rose to 2.4485%
from Monday's 2.4391%.
     YUAN: The yuan appreciated to 6.8990 against the U.S. dollar from Monday's
close of 6.9135. The PBOC set the dollar/yuan central parity rate at 6.8996
Tuesday higher than Monday's 6.8693, with the pair at the highest level since
December 3.
     BONDS: The yield on the benchmark 10-year China Government Bond was last at
3.2800%, up from the 3.2700% closing on Monday, according to Wind Information.
     STOCK: The benchmark Shanghai Composite Index gained 0.37% to 2,594.09, and
Hong Kong's Hang Seng Index rose 0.07% to 25,771.67. 
     FROM THE PRESS: More follow-through from the Huawei case, with Lu Kang a
spokesman at China's Ministry of Foreign Affairs calling on some countries to
stop setting barriers that hinder the normal operations of Chinese tech firms,
the People's Daily Overseas Edition says. The call came in response to concerns
in some EU capitals that tech giants like Huawei may open backdoors to China's
government for surveillance. According to Lu, it is ridiculous for countries to
set barriers based on speculation, as none of them can provide convincing
evidence showing Huawei was a threat to their national security, the newspaper
said. 
     The People's Bank of China will likely end record 33-day long run of open
market operations soon, with analysts suggesting the PBOC will likely to provide
CNY286 billion of Medium-term Lending Facilities (MLFs) this Friday to offset
maturing MLFs, the China Securities Journal reports Tuesday. They will also
likely restart reverse repos in the near future, aiming to plug any short-term
year-end liquidity gaps, the paper said. 
     China's real estate sector is expected to cool at a faster pace in 2019, as
tighter housing regulations and current high prices weigh, the Economic
Information Daily reported Tuesday, citing Qu Qing, an analyst at Huachuang
Securities. This year's buoyant market was largely propped up by the substantial
increase in land acquisition fees during the first half of the year. Although
the increase was unsustainable, with prices declining over the second half of
the year, declines could accelerate in the year ahead, the paper 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
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