MNI China Daily Summary: Tuesday, January 2

     TOP NEWS: The People's Bank of China will continue to focus on maintaining

economic stability and implementing a prudent monetary policy, PBOC Governor

Zhou Xiaochuan said in his annual New Year speech, published by Financial News

on Tuesday. The PBOC will strive to maintain reasonable growth of credit and

social financing, Zhou said, stressing the importance of high-quality economic

growth through further financial reforms and the opening up of the financial

sector. He reiterated that the PBOC will perform its role in the Financial

Stability and Development Committee under the State Council, whose offices are

located in the central bank, and stressed the need to control risks to forestall

systemic financial problems. (Financial News)

     TOP NEWS: The People's Bank of China (PBOC) skipped open-market operations

Tuesday, saying the liquidity level in the banking system is at a relatively

high level. This resulted in a net drain of CNY290 billion for the day, as a

total of CNY290 billion in reverse repos matured on Monday and Tuesday. It was

the seventh consecutive trading day that the PBOC has skipped open-market

operations.

     DATA: Activity in China's manufacturing sector saw a strong improvement in

December as output and new orders grew at faster paces, according to the latest

Caixin Manufacturing Purchasing Managers' Index (PMI) released Tuesday. The

headline manufacturing PMI registered 51.5, the highest level in four months, up

from 50.8 in November. The index remained above the 50 break-even mark for the

sixth consecutive month, according to data compiled by IHS Markit for Caixin

magazine. The performance shown by the Caixin index -- which focuses on smaller

and medium-size companies -- was somewhat at odds with the official

manufacturing PMI jointly released on Sunday by the China Federation of

Logistics and Purchasing and the National Bureau of Statistics. The CFLP/NBS PMI

edged down to 51.6 in December from 51.8 in November, matching expectations.

     DATA: The official China manufacturing purchasing managers index (PMI),

jointly released by the China Federation of Logistics and Purchasing (CFLP) and

the National Bureau of Statistics, edged down to 51.6 in December from 51.8 in

November. The slowdown in December manufacturing PMI matched the median forecast

of an MNI survey predicting a reading of 51.6. The December reading was the 17th

consecutive month that manufacturing sentiment has remained above the 50-point

mark, which divides expansion from contraction. It was also the 15th consecutive

month that the index has been above the 51-point mark.

     RATES: Money market rates were lower on Tuesday after the PBOC skipped

open-market operations. The seven-day repo average was last at 2.7615%, down

from Friday's average of 2.9600%. The overnight repo average was at 2.6054%

compared with Friday's 2.7285%.

     YUAN: The yuan rose against the U.S. dollar Tuesday morning after the

People's Bank of China set a stronger daily fixing. The yuan was last at 6.4948

against the U.S. unit, rising 0.19% compared with the official closing price of

6.5120 on Friday. The People's Bank of China set the yuan central parity rate

against the U.S. dollar at 6.5079 on the first trading day of 2018, stronger

than the 6.5342 set before New Year's holiday. It was the biggest daily

strengthening of the fixing since Dec. 26, and the strongest since Sept. 11,

2017.

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

3.9000%, up from the previous close of 3.8847%, according to Wind, a financial

data provider.

     STOCKS: Stocks rose, led higher by the cement sector. The benchmark

Shanghai Composite Index closed up 1.24% at 3,348.33. Hong Kong's Hang Seng

Index was 1.86% higher at 30,476.13.

     FROM THE PRESS: Both banks and home buyers are under great pressure from

stricter mortgage requirements, the 21st Century Business Herald reported

Tuesday. The newspaper cited an anonymous bank source as saying it now takes six

months or more to get a mortgage, with some banks having stopped their mortgage

lending. Banking experts said quotas will remain under stress in 2018 because

China will continue deleveraging of its property sector. That process is

increasingly pressuring banks to restructure their businesses because exposures

to the property sector are large, the report said. At one branch of a bank in

Guangdong province, the property sector exposure accounted for 62.5% of bank

assets, according to the newspaper. (21st Century Business Herald)

     China will take steps to further boost domestic consumption in 2018, the

Economic Information Daily reported Tuesday, citing Zheng Wen, an official at

the Ministry of Commerce. MOFCOM will create commercial areas in a number of

medium-size and large cities, including 100 commercial areas and 20 commercial

streets, anchored by brands with long histories and good reputations, to

stimulate consumption, Zheng told the newspaper. Chen Guokai, head of the

ministry's market operations bureau, said China will nurture several

"consumption cities" where the large potential for consumption can be tapped. In

addition, more tax-free consumption policies could be implemented, Chen said.

Under this consumption upgrade action plan, the government will support

consumption of medium- to high-quality products and promote "green consumption"

-- adopting green technology, using environmentally safe packaging and promoting

recycling, the ministry said. (Economic Information Daily)

     The reform of the operation and investment activities of state-owned

companies will be sped up and upgraded in 2018, the Economic Information Daily

said in front-page report on Tuesday. "Relevant government departments" are

about to implement a series of policies to reform the investment by and

operation of SOES, the newspaper said. Reorganization and reform of SOEs will be

deepened and their operating activities will be further specified in the reform,

the report said. (Economic Information Daily)

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

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

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