MNI China Daily Summary: Tuesday, October 22

     EXCLUSIVE: China will look to its three big policy banks to boost support

for investment after growth fell to a record low in the third quarter, sources

familiar with macro policies told MNI. "When economic headwinds get stronger,

the policy banks, supported with sovereign credit, will play a more active role

in boosting infrastructure investment, as they can raise capital by issuing

long-term and low-interest bonds," a source said, "Monetary and fiscal

authorities are expected to allow them more leeway to further expand credit."

     POLICY: The People's Bank of China (PBOC) will probably continue to leave

interest rates unchanged in Q4, given that major economic data including social

credit indicators will grow at a stronger pace from last year's low base of

comparison, said Zhang Bin, a senior follow at the China Finance 40 Forum, a

prominent think tank. However, Zhang still advocates for a rate cut to stimulate

the softening demand amid below-expectation growth.

     LIQUIDITY: The PBOC added CNY250 billion liquidity by 7-day reverse repos,

according to Wind Information. The injection aims to offset tax payments and

demand from local treasuries, the PBOC said.

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

institutions (DR007) increased to 2.8332% from Monday's close of 2.7205%, Wind

Information showed. The overnight repo average rose to 2.8044% from Monday's

2.6935%. 

     YUAN: The yuan weakened to 7.0817 against the dollar from Monday's close of

7.0678. The PBOC set the dollar-yuan central parity rate stronger at 7.0668,

compared with 7.0680 on Monday.

     BONDS: The yield on 10-year China Government Bonds was last at 3.2100%,

down from the close of 3.2150% on Monday, according to Wind Information. 

     STOCKS: The Shanghai Composite Index edged up 0.50% to 2,954.38. Hong

Kong's Hang Seng Index increased 0.23% to 26,786.20.

     FROM THE PRESS: The PBOC may make further cuts to the reserve requirement

ratio or lower the rate of medium-term lending facility at the end of this year,

in a bid to guide the Loan Prime Rate (LPR) down, the National Business Daily

reported citing Wang Qing, chief macroeconomic analyst at credit rating agency

Dongfang Jincheng. A lower LPR would help reduce financing costs in the real

economy, while also stabilizing price expectations, the report said.

     China should continue to boost consumption to drive growth to counter

external uncertainties, the Economic Information Daily said in a front-page

commentary. The government should stabilize the employment market and increase

the supply of high-quality products and services, the newspaper said. The

government should also ease consumers' spending concerns by improving the social

security system and promoting the construction of policy housing as high housing

prices have dampened urban consumption, the commentary 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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