MNI China Daily Summary: Tuesday, December 25

     TOP NEWS: China said on Tuesday it will further reduce market barriers,

Xinhua News Agency reported. A new so-called negative list of industries closed

to investment has 151 items and 581 specific rules, down from 177 and 288 in the

previous version, Xinhua said.

     INSIGHT: China will put weight on countercyclical measures, including

further prudent monetary policy easing and more proactive fiscal policy, to

boost domestic investment which is subject to the pressure of an economic

slowdown, MNI understands from officials and advisors. A major driver of policy

next year will be investment, including in infrastructure and manufacturing. The

monetary authority will retain adequate liquidity while there will be enhanced

targeted credit support to small private businesses and fiscal policy will

provide a larger tax cut and increased spending to strengthen infrastructure,

sources told MNI.

     LIQUIDITY: The People's Bank of China (PBOC) injected CNY30 billion by

7-day reverse repos, and CNY20 billion by 14-day reverse repos today, a seventh

trading day that the central bank has added liquidity by open market

operations(OMOs). It resulted in a net drain of CNY90 billion given the maturity

of CNY140 billion of reverse repos, according to Wind Information. The PBOC said

today's OMO is to offset financial institutions' payment of deposit reserve, the

issuance of government bonds and other factors.

     RATES: The 7-day weighted average interbank repo average rate for

depository institutions (DR007) decreased to 2.5735% from Monday's close of

2.6290%, Wind Information showed. The overnight repo average fell to 1.9952%

from Monday's 2.2639%.

     YUAN: The yuan appreciated to 6.8860 against the U.S. dollar from Monday's

close of 6.8965. The PBOC set the dollar-yuan central parity rate at 6.8919

today, compared with 6.9006 on Monday.

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

3.3200%, down from the 3.3525% closing on Monday, according to Wind Information.

     STOCK: The benchmark Shanghai Composite Index fell 0.88% to 2,504.82. Hong

Kong market is closed for Christmas Day.

     FROM THE PRESS: China's monetary policy next year should not be loosened to

the extent that it encourages speculation in real estate again, nor should it

result in excessive liquidity in the banking system while failing to support the

economy, the 21st Century Business Herald reported today citing Sheng Songcheng,

a former official at the People's Bank of China. Regulators may consider

lowering the reserve requirement ratio (RRR) rather than cutting broad interest

rates if necessary, the newspaper said citing Sheng.

     China's fiscal policy next year will aim to be more proactive and efficient

according to the tone set by the Central Economic Work Conference last week,

Xinhua News Agency reported today citing interviews with economists. The

government will keep a sizeable deficit, put forward larger tax and fee cuts,

increase the issuance of special bonds, and expand expenditures at targeted

areas such as improving people's livelihood, Xinhua said.

     China's State Council pledged to further support the development of private

companies and SMEs, treat them equally with SOEs in terms of bidding for land

use, remove investment barriers in resources and transportation, further cut

taxes and fees and improve financing services including targeted RRR cuts for

them, Xinhua News Agency reported on Monday night following a cabinet meeting

chaired by Premier Li Keqiang.

--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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