MNI China Daily Summary: Tuesday, September 12

     TOP NEWS: China could hit back at U.S. tariffs by restricting the export of

rare-earth metals, an essential component of electronic goods including mobile

phones, a leading Chinese expert on China-U.S. relations and former deputy head

of a government think tank said in an exclusive interview. "China basically

dominates the rare-earth market, providing 85% to 95% of annual global demand.

That gives China great power over the elements used in most high-tech devices,"

said Jin Canrong, deputy director of the National Association of International

Studies. China could also restrict exports of other key supply chain components,

including those of the healthcare sector, Jin told MNI on the sidelines of the

Taihe Civilizations Forum.

     LIQUIDITY: The People's Bank of China (PBOC) injected CNY60 billion via

7-day reverse repos to maintain "reasonable and ample" liquidity. The rate was

kept unchanged at 2.55%, according to its website. The CFETS-ICAP money-market

sentiment index closed at 41 on Tuesday, down from 51 on Monday.

     YUAN: The yuan depreciated to 6.8735 against the dollar from Tuesday's

closing of 6.8637. The PBOC set the yuan central parity rate at 6.8546, weaker

than Tuesday's 6.8488.

     MONEY MARKET RATES: The benchmark seven-day deposit repo average decreased

to 2.6596% from 2.6694% Tuesday, while the overnight average fell to 2.5443%

from 2.5760%: Wind Information.

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

3.6695%, down from Tuesday's close of 3.6750%, according to Wind Information.

     STOCKS: The Shanghai Composite Index fell 0.33% to close at 2,656.11. Hong

Kong's Hang Seng Index declined 0.45% to 26,304.09.

     FROM THE PRESS: The PBOC's use of the so-called countercyclical factor in

calculating its yuan fixing is intended to limit the impact of one-way bets and

not to reverse the currency's depreciation, Shanghai Securities News said,

citing analysts. The dollar's strength is one reason behind the yuan's weakness,

the newspaper added. The offshore yuan (CNH) exchange rate may rebound as

policymakers tighten liquidity, in a warning to investors shorting the currency,

the newspaper said.

     China's state-owned enterprises (SOEs) are accelerating restructuring and

merger plans following unprecedented executive turnover this year, the Economic

Information Daily reported. At least 42 SOEs have made 176 personnel changes so

far in 2018, the newspaper said, citing government information. While they can

be useful in prompting consolidation, leadership changes can also delay reform

implementation if too frequent, the newspaper said, citing Liu Xingguo,

researcher at the China Enterprise Federation. SOE consolidation may intensify

in the automobile, telecommunication, chemical and ship-building industries, the

newspaper added.

     China plans to boost consumption of high-end information-based consumer

products, including smart home appliances, wearables and intelligence-based

medical and transportation products, the Economic Information Daily said, citing

the Ministry of Industry and Information Technology. The consumption of

information technology rose 15% in the first half of this year to CNY2.3

trillion, more than double the rate of China's GDP growth, and will remain an

important driver going forward, the newspaper said.

--MNI Beijing Bureau; tel: +86 (10) 8532-5998; email: flora.guo@marketnews.com

--MNI London Bureau; +44 207-862-7489; email: ukeditorial@marketnews.com

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