MNI China Daily Summary: Tuesday, December 11

     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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