MNI China Daily Summary: Tuesday, October 24

     TOPS NEWS: Chinese government moves to cut business fees and establish a

new value-added tax system will ease the business tax burden by at least CNY1

trillion this year, the South China Morning Post reported late Monday, citing

Chinese Finance Minister Xiao Jie. Xiao told the newspaper that as of the end of

August the new VAT system had cut business taxes by about CNY1.6 trillion since

its launch in 2013. Xiao said China's fiscal deficit would fall to the targeted

CNY2.38 trillion this year and the fiscal deficit-to-GDP ratio would fall below

3% due to "stronger-than-expected economic growth," according to the Post.

Regional debt ceilings will be created to manage debt risks incurred by local

governments, Xiao said, stressing that debt issued by local government financing

vehicles (LGFV) is not government debt but rather corporate debt. He also said a

property tax system could be launched in China but that "ample research and

study" was still needed. Deputy Finance Minister Hu Jinglin said more tax pilot

programs would be created in designated industrial parks, the newspaper

reported. (South China Morning Post)

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

reverse repos and CNY120 billion in 14-day reverse repos via open-market

operations Tuesday. This resulted in a net injection of CNY140 billion for the

day, as a total of CNY110 billion in reverse repos matured on Tuesday. Tuesday

was the sixth consecutive trading day that the PBOC has injected liquidity into

the banking system. The PBOC injected a net CNY560 billion into the interbank

market via OMOs last week and has injected CNY280 billion so far this week. A

total of CNY480 billion in reverse repos mature this week. The PBOC said that

its injections are intended to hedge the impact from corporate tax payments,

government bond purchases and maturing reverse repos this month, and so maintain

stable liquidity conditions in banking system.

     RATES: Money market rates were mixed on Tuesday after the PBOC injected a

net CNY130 billion via open-market operations. The seven-day repo average was

last at 2.7802%, down from Monday's average of 2.7896%. The overnight repo

average was at 2.6347% compared with Monday's 2.6198%.

     YUAN: The yuan was slightly stronger against the U.S. dollar on Tuesday

even though the People's Bank of China set a weaker daily fixing. The yuan was

last at 6.6335 against the U.S. unit, rising 0.09% compared with the official

closing price of 6.6398 on Monday. The People's Bank of China set the yuan

central parity rate against the U.S. dollar at 6.6268 Tuesday, modestly weaker

than Monday's 6.6205.

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

3.7250%, up from the previous close of 3.7200%, according to Wind, a financial

data provider.

     STOCKS: Stocks rose, led higher by real estate firms and securities

brokerages. The benchmark Shanghai Composite Index closed 0.22% higher at

3,388.25. Hong Kong's Hang Seng Index was 0.65% lower at 28,121.94. 

     FROM THE PRESS: Consumption's role in the Chinese economy has increased to

become one of the main drivers of growth, the Financial News, a newspaper

operated by the People's Bank of China, reported on its front page Tuesday.

Ministry of Commerce spokesman Gao Feng told the newspaper the next step for

China would be working to transform and upgrade consumption by enhancing

supplies of high-quality goods and expanding sales channels; enhancing the

integration of the internet with the service sector; improving the use of

"consumption information"; and improving the consumption environment by creating

a system to gauge commercial businesses' creditworthiness and punish violators.

(Financial News)

     Yang Weiming, deputy head of government's Central Finance Leading Group

Office, stressed Monday that Chinese green finance has great potential and that

China still has significant growth room for its development, the Financial News

reported. Given that Chinese President Xi Jinping proposed the further

development of green finance in his keynote speech at the opening ceremony of

the 19th Party Congress, Yang said the People's Bank of China is coordinating

with related government bodies and has already issued some guidance. "Policies

and measures are being implemented," Yang said. (Financial News)

     China will not pursue the "free trade champion" title, nor will it make

promises beyond its ability, but will continue its "opening up" strategy and

make further progress in expanding access to its market, an unidentified

researcher at the Ministry of Commerce said in an article published in the

official People's Daily on Tuesday. The article listed examples of Western

countries' increased restrictions on mergers and acquisitions by foreign

companies, commenting that the measures amounted to "protectionism." The

researcher also said the West and the East are pursuing different policies in

terms of trade and the economy, and so investors and technology talents should

come to China to "give it a try." (People's Daily)

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

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

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