MNI China Daily Summary: Tuesday, November 12

     TOP NEWS: China must present detailed plans to promote mixed-ownership

reform of state-owned companies in the next three years, including measures to

strengthen the supervision of SOEs, reduce and standardize subsides, enhance R&D

and innovation capabilities, as well as improve labor productivity and return on

capital, Vice Premier Liu He said in a statement on the government's website.

     LIQUIDITY: The People's Bank of China (PBOC) skipped open market operations

for the fifth trading day, leaving liquidity unchanged, according to Wind

Information. The level of liquidity in the banking system is reasonable and

ample, the PBOC said.

     RATES: The seven-day weighted average interbank repo rate for depository

institutions (DR007) rose to 2.6280% from 2.4963% on Monday, Wind Information

showed. The overnight repo average increased to 2.3573% from 2.0296% on Monday.

     YUAN: The yuan strengthened to 7.0028 against the dollar from 7.0065 on

Monday. PBOC set the dollar-yuan central parity rate lower for the first time in

five trading days at 6.9988, compared with Monday's 6.9933.

     BONDS: The yield on 10-year China Government Bonds was last at 3.2500%, up

from the close of 3.2100% on Monday, according to Wind Information.

     STOCKS: The Shanghai Composite Index edged up 0.17% to 2,914.82, with

shares related to Hainan island leading the gain and infrastructure stocks

recovered. Hong Kong's Hang Seng Index increased 0.52% to 27,065.28.

     FROM THE PRESS: China doesn't face deflation and has room for proactive

fiscal measures supported by monetary policies, China Business News reported

citing Sheng Songcheng, the former director of the Survey and Statistics

Division of PBOC. Monetary policy should not be eased further, but there is a

need for structural adjustment, said Sheng. Lowering the rate of medium-term

lending facility (MLF) or loan prime rate (LPR) is better in reducing the cost

of financing than a reserve requirement ratio (RRR) cut, the newspaper said.

     PBOC is unlikely to cut MLF rate if it rolls over the maturity of CNY187.5

billion, the Securities Daily reported citing Yuan Yacheng, a senior researcher

at Minsheng Bank. After the MLF rate cut last week, PBOC may slow the pace of

further easing, given rising inflation and further tightening of the real estate

sector. PBOC may also roll over reverse repos to fill in the liquidity gap by

year-end, Cheng said according to the daily.

     China may issue up to CNY3.35 trillion infrastructure-backed

special-purpose bonds next year given the need for debt swaps and boosting

growth, said Ming Ming, the chief analyst at CITIC Securities in a report. If

one-fourth of the new bonds, or around CNY840 billion, goes towards funding

infrastructure, infrastructure investment is likely to accelerate to 5.5-6%,

Ming 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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