MNI China Daily Summary: Tuesday, November 13

     POLICY: The People's Bank of China (PBOC) Shanghai branch said Tuesday that

it will continue to use all tools to support private and innovation businesses,

including quickening the launch of the first batch of tools supporting private

companies issuing bonds. It will add another CNY3.55 billion of rediscount funds

for leading private companies in November, it added on its official website. On

the same day, PBOC's Tianjin branch announced it will arrange no less than CNY5

billion refinancing funds and CNY5 billion rediscount funds to increase credits

for private and small companies.

     DATA: China's M2 grew by 8% y/y in October, decelerating from September's

8.3%, and equalling June's year low. Total social financing saw a dramatic slump

in October, plunging to CNY728.8 billion, much lower than September's CNY2.21

trillion, hitting the lowest level since July 2016 (when it came in at CNY490.0

billion)n The latest data again indicates that the PBOC's current ample

liquidity failed to flow into the real economy. New loans increased CNY697

billion in October, down sharply from September's CNY1.38 trillion gain to the

lowest level this year.

     LIQUIDITY: The PBOC skipped open market operations (OMOs) Tuesday, leaving

liquidity unchanged, as no reverse repos matured, according to Wind Information.

The central bank said 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 2.6326% from Monday's close of

2.6048%, Wind Information showed. The overnight repo average increased to

2.4484% from Monday's 2.3034%.

     YUAN: The yuan closed at 6.9577 against the U.S. dollar after Monday's

close of 6.9661. The PBOC set the yuan central parity rate higher at 6.9629 on

Tuesday, compared with Monday's 6.9476, as the Chinese currency weakened early

for a fourth trading day.

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

3.4500%, down from the closing price of 3.4800% on Monday, according to Wind

Information.

     STOCKS: The benchmark Shanghai Composite Index closed 0.93% higher at

2,654.88. Hong Kong's Hang Seng Index increased 0.62% to 25,792.87.

     FROM THE PRESS: China's economy could face three major financial risks in

the year ahead, including possible local government debt defaults, pressures

generated from ongoing real estate market regulation reform and the U.S. lifting

long-term interest rates beyond expectations, wrote Zhang Ming, researcher at

the Institute of World Economics and Politics under the Chinese Academy of

Social Sciences in a commentary piece published by Economic Daily on Tuesday.

Zhang suggests that the government should increase the issuance of treasury

bonds to hedge the deleveraging pressure on local governments. At same time, the

banking system should raise appropriate capital and set aside more money against

bad loans, the newspaper said citing Zhang. (Link to the story:

https://bit.ly/2JXA6cX)

     Small and micro enterprises are expected to save nearly CNY1 billion in

costs if the average interest rate of borrowing from major commercial banks is

cut by 0.3 percentage point as the State Council proposed, the Securities Daily

said on Tuesday. The State Council executive meeting last Friday, deciding to

cut the average interest rate for lending to small companies by one percentage

point in the fourth quarter, compared to that in the first quarter. This will

lead to an actual 0.3 percentage point cut, the newspaper said. As of end Q3,

the average interest rate of small companies charged by 18 major commercial

banks was 6.23%, about 0.7 percentage points lower than that in the first

quarter, the Daily said, citing data from China Banking and Insurance Regulatory

Commission. (Link to the story: https://bit.ly/2PWWgkI)

     China's economy has great potential for growing consumer demand, with the

continuing trend of upgraded consumption -- where consumers buying habits move

towards higher grade items -- seen during the Double Eleven e-commerce shopping

festival last weekend, the Economic Information Daily said in a front-page

commentary Tuesday. The historical high CNY213.5 billion on turnover on Taobao,

the world's biggest e-commerce website, seen on Nov 11 underlined the spending

power of China's consumers, the Daily said. Though retail sales growth

decelerated to below 10% this year, online retail sales continues to grow at

around 30%, which will help to offset external headwinds and stabilize economic

growth. (Link to the story: https://bit.ly/2PQTY6Z)

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

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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