MNI China Daily Summary: Tuesday, October 23

     TOP NEWS: China will continue to diversify its foreign exchange reserves

out of dollars, increasing its long-term investments in the One Belt and One

Road Initiative (OBOR), a former senior People's Bank of China(PBOC) official

told MNI. "We have made many supportive moves, including Silk Road Funds and the

Asian Infrastructure Investment Bank (AIIB), for long-term investment in

projects in countries alongside the OBOR," said Wei Benhua, former deputy

administrator-in-bureau at the State Administration of Foreign Exchange, the

PBOC's forex regulator.

     POLICY: The Chinese government is likely to scale back regulatory and

environmental restrictions faced by private businesses as the economy slows,

Huang Yiping, a former member of the People's Bank of China's Monetary Policy

Committee, told MNI. Non-state-owned companies have borne the brunt of official

campaigns tackling problems ranging from excessive borrowing and shadow banking

to air pollution, said Huang, now a scholar at Peking University and a member of

think tank China Finance 40 Forum (CF40).

     STOCKS: The benchmark Shanghai Composite Index ended Tuesday's session

2.26% lower at 2594.83. Hong Kong's Hang Seng Index fell 3.08% to 25346.55.

     LIQUIDITY: The PBOC injected CNY120 billion of seven-day reverse repos on

Tuesday, the third consecutive day of net injections. With no reverse repos

maturing, the move resulted in a net injection of CNY120 billion in liquidity,

according to Wind Information. The 7-day weighted average interbank repo average

rate for depository institutions (DR007) fell to 2.6085% from Monday's close of

2.6185%, Wind Information showed. The overnight repo average decreased to

2.4342% from Monday's 2.4646%.

     YUAN: The yuan depreciated to 6.9385 against the U.S. dollar from Monday's

6.9372 close. The PBOC set the yuan central parity rate at 6.9338 on Tuesday,

compared to Monday's 6.9236, with the yuan falling again against the dollar

after Monday's gain.

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

3.5700%, down from the closing price of 3.5950% on Monday, according to Wind

Information.

     FROM THE PRESS: Setting up supporting tools to help private enterprises

with bond financing does not mean a change in direction for monetary policy,

wrote Xu Zhong, director of the research bureau at the PBOC in an op-ed piece

published by the China Securities Journal. The PBOC said late Monday it will use

refinancing to provide initial funds for professional institutions, allowing

them to ease access for private companies to the corporate bond market, mainly

via selling credit risk management tools to private firms, providing guarantees

or credit enhancement. The central bank also said it would boost relending and

rediscount quotas by CNY150 bln to boost financing needs of smaller firms.

According to Xu, it is policy innovation to ease temporary financing

difficulties for private enterprises that have competitive technology and good

market prospects. 

     Eleven securities brokerages have reached a joint agreement to invest CNY21

billion to set up a parent asset management plan, which will serve as a guiding

fund to support various securities companies in creating several sub asset

management plans, the http://Wallstreetcn.com reported on Tuesday, citing an

announcement by the Securities Association of China. The aim is to attract funds

from banks, insurance firms, state-owned enterprises and government platforms

and form an asset management plan with a total size of CNY100 billion. The plan

aims to bailout listed firms with an equity pledge risk and ease the liquidity

pressure for prospective listed companies amid the recent A-share slump, the

report said. 

     Housing prices in tier-one cities have cooled overall, with real estate

developers in Beijing and Shanghai trying a series of promotional tools

including offering discounts and free interior design, the CCTV Finance reported

on Tuesday. The CCTV reporter visited more than ten residential sales projects

in Beijing, finding all projects are offering discounts ranging from 1% to 15%.

While in Shanghai, there are projects offering BMW cars as a 'gift' for buying

property, the report said. According to the report, the supply of new homes in

first-tier cities has increased recently, and fierce market competition is the

main drivers for discount sales. The situation will likely continue, as an

increasing number of new homes are expected on the market in the near future. 

--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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