MNI China Daily Summary: Tuesday, November 14

     TOP NEWS: The National Bureau of Statistics on Tuesday released October

economic performance indexes, which overall pointed to a softening economy.

Industrial output rose 6.2% year-on-year in October, lower than the 6.6%

year-on-year increase in September. The October result was below the MNI survey

median forecast for a 6.3% rise and was also the second lowest this year, above

only August's 6.0% gain. Retail sales rose 10.0% year-on-year in October, lower

than the MNI survey median forecast for a 10.4% gain and the 10.3% growth rate

in September. It was the lowest reading this year. Fixed-asset investment rose

7.3% year-over-year in the first 10 months of 2017, slowing from the 7.5% gain

posted in the January-September period. The January-October figure was lower

than the MNI survey median for a 7.4% increase and the lowest since December

1999, when it was 6.3%. Property investment in the first 10 months rose 7.8%

year-on-year, below the 8.1% gain in the first three quarters and the lowest

growth rate since the January-December 2016 reading, when it was 6.9%.

     TOP NEWS: Foreign direct investment (FDI) into China rose 5% year-on-year

to CNY60.12 billion in October, decelerating over the 17.3% growth seen in

September, the Ministry of Commerce said Tuesday in a statement on its website.

For the first 10 months, FDI increased 1.9% on an annual basis to CNY678.7

billion, excluding investment in the financial sector, compared with a 1.6%

decrease during the first nine months, the ministry said.

     LIQUIDITY: The People's Bank of China injected CNY130 billion in seven-day

reverse repos, CNY120 billion in 14-day reverse repos and CNY30 billion in

63-day reverse repos via open-market operations. This resulted in a net

injection of CNY140 billion for the day, as a total of CNY140 billion in reverse

repos matured.

     RATES: Money market rates were mixed. The seven-day repo average was last

at 2.9370%, compared with Monday's average of 2.9430%. The overnight repo

average was at 2.8425%, compared with Monday's 2.8202%.

     YUAN: The yuan rose slightly against the U.S. dollar even though the

People's Bank of China set the fixing rate weaker for the day. The yuan was last

at 6.6418 against the U.S. unit after opening at 6.6388, compared with the

official closing price of 6.6422 on Monday. The PBOC set the yuan central parity

rate at 6.6399, weaker than Monday's 6.6347. The PBOC has set the fixing weaker

for two straight trading days.

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

3.9950%, compared with the previous close of 3.9800%.

     STOCKS: Stocks were down, led lower by the consumer goods sector. The

benchmark Shanghai Composite Index closed down 0.53% at 3,429.55. Hong Kong's

Hang Seng Index was 0.07% lower at 29,163.15.

     FROM THE PRESS: China should seize the current chance to deepen

market-oriented exchange rate reform, Guan Tao, former head of the balance of

payments division at the State Administration of Foreign Exchange (SAFE) and now

a research fellow with the 40Forum think tank, said in a commentary published

Tuesday in the Financial News, a journal run by the People's Bank of China.

Reform of the yuan exchange rate formation mechanism should include optimizing

the central parity calculation method, widening the volatility range of the yuan

and increasing the flexibility of the exchange rate, Guan noted. The reform

should develop the foreign exchange market by relaxing restrictions, Guan

suggested. Market dynamics will not have a chance to work unless the country

increases access for market participants with different risk appetites,

increases the number and type of forex trading products on offer and lifts

controls on real demand for foreign exchange, Guan warned. The dominant role of

the market needs to be built up or the market will never be able to operate

without the assistance of the central bank, Guan argued. (Financial News)

     The bond market will remain bearish in the near term given current

pessimistic market sentiment due to signs of robust economic growth and

uncertainty about future financial regulation, the China Securities Journal

reported Tuesday. After the big correction in October, commercial banks have

started to increase their holdings of Chinese government bonds (CGBs), the

report noted. If economic indicators show an obvious slowdown, institutions

further increase their CGB holdings, and new regulations are launched soon to

clear up uncertainty, there is a chance for the bond market to rebound at the

end of this year or in the first quarter of next year, the report argued. Also

weighing on the market, the Federal Reserve is expected to hike its benchmark

interest rate in December and the Chinese government's annual economic work

conference next month will probably signal some policy adjustments, the report

noted. (China Securities Journal)

     Property market demand is sluggish due to strict government controls even

though supply is increasing, the 21st Century Business Herald reported Tuesday.

Sales volume of second-hand houses in Beijing fell 73% on an annual basis and

31% month-on-month in October, a month that includes the week-long National Day

holiday, which is traditionally a strong sales period, the report said. Tight

restrictions and weak the sales performance have caused a drop in real estate

agency confidence for the first time in three months. The property market

slowdown is expected to accelerate in the months ahead, with no recovery at

least until the middle of next year, the report noted. (21st Century Business

Herald)

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

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

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