MNI China Daily Summary: Tuesday, October 30

     BEIJING (MNI) - TOP NEWS: The yuan is unlikely to depreciate past the key

level of 7 to the U.S. dollar as the People's Bank of China (PBOC) will probably

step up defence measures following a series of interventions beginning in

September, the Economic Information Daily said in a front-page commentary on

Tuesday. The central bank has the "basis, capability and confidence" to keep the

yuan basically balanced, the daily said, citing Deputy Governor Pan Gongsheng.

While the yuan has been pressured by bearish factors, trade frictions with the

U.S. and cross-border capital flows can be managed. The opening up of Chinese

financial markets will also attract more capital inflows, the daily said.

     LIQUIDITY: The PBOC skipped open market operations (OMOs) for a third

trading day on Tuesday, leading to a liquidity drain of CNY120 billion due to

the maturity of reverse repos, according to Wind Information. The central bank

said on its website an increase in fiscal expenditure near month-end should

offset the impact of reverse repo maturities and other factors. The 7-day

weighted average interbank repo average rate for depository institutions (DR007)

decreased to 2.5293% from Monday's close of 2.6030%, Wind Information said. The

overnight repo average decreased to 1.5358% from Monday's 1.8206%.

     YUAN: The yuan depreciated to 6.9595 against the U.S. dollar from Monday's

close of 6.9560. The PBOC set the yuan central parity rate weaker at 6.9574 on

Tuesday from Monday's 6.9377. Today's fixing was the lowest since May 21, 2008.

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

3.52%, up from the closing price of 3.5075% on Monday, according to Wind

Information.

     STOCKS: The benchmark Shanghai Composite Index closed 1.02% higher at

2,568.05. Hong Kong's Hang Seng Index decreased 0.91% to 24,585.53.

     FROM THE PRESS: U.S. accusations that China is not a market economy are

unreasonable and only serve as a pretext for trade war, the People's Daily said

in a commentary on Tuesday. Measures to contain China's rise will inevitably

fail, the daily said. (Link to the story: https://bit.ly/2z9cZqK)

     The newly-elected Brazilian President Jair Bolsonaro should not copy U.S.

President Donald Trump's trade policies against China, the official

English-language China Daily said in an editorial. Bolsonaro should be aware

that China is Brazil's largest export market, the newspaper said. The cost of

"dumping China" could be severe for the Brazilian economy, China Daily said.

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

--MNI London Bureau; +44208-865-3829; email: Jason.Webb@marketnews.com

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