MNI China Daily Summary: Tuesday, May 22

     TOPS NEWS: The People's Bank of China injected CNY50 and CNY50 billion in

7-day and 14-day reverse repos on Tuesday, respectively, with rates unchanged at

2.55% and 2.70%, the central bank said on its website. This left liquidity

unchanged total CNY100 billion in reverse repos matured today. CFETS-ICAP's

money-market sentiment index closed at 38 on Monday, up from 33 on Friday. 

     POLICY: China is working to further improve the investment environment for

foreign investors, Deputy Minister of Commerce Wang Shouwen on Tuesday. As

global competition for foreign investment rises and China is under greater

pressure to attract overseas companies, the government will streamline

licensing, registration and filing processes, Wang said in a press conference.

     MONEY MARKET RATES: 7-day repo average rose to 2.6938% from 2.6911% Monday,

after the PBOC injected CNY100 billion via open market operations, which

resulted in no change in liquidity condition. The overnight repo average

increased to 2.5154% from Monday's 2.5075%.

     YUAN: The yuan rose to 6.3755 against the dollar from Monday's closing of

6.3888. Earlier today, the PBOC set the yuan central parity rate at 6.3799,

stronger than Monday's 6.3852.

     BONDS: The yield on benchmark 10-year China Government Bonds fell to

3.6600% from the previous close of 3.6850%, according to Wind Information.

     STOCKS: Shares in Shanghai edged up, supported by positive sentiment over

the de-escalation of the China-U.S. trade row. Agricultural companies gained

with Great Sun Foods up by more than 8%. The benchmark Shanghai Composite Index

closed 0.02% higher at 3,214.35. Hong Kong's Hang Seng Index gained 0.6% to

31,234.35.

     FROM THE PRESS: China's top leaders have reached a consensus on local

governments' hidden debts and will more clearly define them, reported 21st

Century Business Herald. Local hidden debts will be the responsibilities of

those who borrowed them, the report said, citing sources close to regional

government. The lack of clarity on what what hidden debts are make it difficult

to resolve them, the paper said. 

     Recent gains in bond defaults and increasing difficulties in issuing them

reflect the ongoing deleveraging campaign worsened investors' outlook on them,

reported Securities Times. The financial deleveraging campaign has tightened

funding channels, mainly affecting private corporations that had previously

raised too much debt and expanded aggressively, the report said. Regulators need

to closely follow the liquidity condition and market expectations to allow some

companies to default and prevent regional risks from developing into systemic

financial risks, the report said.

     Chinese analysts expect fiscal spending to accelerate in the next two

months after recent government decisions to boost expenditures, China Securities

Journal reported. China will increase the efficiency of fiscal spending and help

cushion the impact of tighter funding on the economy, the report said, citing

Pan Xiangdong, the chief economist at New Times Securities. However, faster

fiscal spending in the first half of the year will mean a slowdown second half

given local government's limited coffers, said Pan. As the deleveraging and

financial risks prevention campaign continue, fiscal spending will likely

support energy-saving, environment protection and rural develop, not only

infrastructure, said the report, citing Zhao Wei, analyst at Changjiang

Securities.

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

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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