MNI China Daily Summary: Tuesday, October 9

     TOP NEWS: The latest cut in banks' reserve requirements by the People's

Bank of China(PBOC) is unlikely to be followed quickly by further easing moves,

as it copes with limited policy levers to boost real economy credit and tries to

avoid undermining the yuan, sources close to the central bank told MNI. "The

funding difficulty of the small private companies is largely due to the low risk

appetite of lenders and credit shrinkage, so there is little space for a further

RRR cut this year, but maybe one in Q1 next year," the source said.

     LIQUIDITY: The PBOC skipped open market operations Tuesday, resulting in a

net liquidity drain of CNY60 billion due to reverse repos maturing, according to

Wind Information. The central bank said liquidity in the banking system is

relatively high to absorb reverse repo maturities. Tuesday was the fifth

straight trading day the PBOC has skipped OMOs and the eighth consecutive

trading day the central bank has net drained liquidity. The benchmark 7-day

deposit repo average dropped to 2.6292% on Tuesday from 2.6338% on Monday. On

Monday, the CFETS-ICAP's money-market sentiment index closed at 40, down from 51

on Sept 30 and a pre-close indication Tuesday showed the index lower again at 36

mid-afternoon Beijing time.

     MONEY MARKET RATES: The 7-day repo average dropped to 2.6102% from 2.6338%

Monday, while the overnight repo average decreased to 2.4918% from Monday's

2.5176%.

     YUAN: The yuan depreciated to 6.9219 against the U.S. dollar from Monday's

closing of 6.9135. The PBOC set the yuan central parity rate weaker for a sixth

straight trading day at 6.9019, compared with 6.9135 on Monday.

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

3.615%, unchanged compared with the close of 3.615% on Monday, according to Wind

Information.

     STOCKS: The benchmark Shanghai Composite Index closed 0.17% higher at

2721.01. Hong Kong's Hang Seng Index increase 0.06% to 26219.6.

     FROM THE PRESS: It is an exaggeration to say that foreign investors are

moving their investment out of China, the Economic Daily said in a front-page

commentary Tuesday. It is normal for foreign investment to move in or out of

China, the paper said, noting some companies are merely restructuring their

investments and have transferred capital to other parts of China. Others that

choose to close their factories are making standard business decisions, the ED

said. Foreign investors are in fact more confident over investing in China, as

official data showed high-tech investment in China has picked up, the paper

noted.

     China's State Council has decided to overhaul its export tax rebate

policies to reduce the burden on enterprises and to help maintain the steady

growth of foreign trade, the official Xinhua News Agency said. However, products

seen as ecologically unfriendly, as well as those on the list for cutting

overcapacity, will see no changes in their export tax rebate rates, Xinhua

noted.

     China's property market experienced a pullback from its peak over the

week-long National Day Holiday, the 21st Century Business Herald said, citing

analysts. According to the paper, sales of both new and second-hand commercial

buildings slowed over the holiday period, extending what they called a year-long

downturn. According to the report, the downward trend for house prices is

expected to spread to other cities in Q4.

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

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

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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