MNI China Daily Summary: Tuesday, September 24

     PBOC: China is not eager to pursue "relatively large reduction" in required

reserve ratios or quantitative easing and interest rate cuts like other central

banks, Governor Yi Gang of the People's Bank of China (PBOC) said at a presser

in Beijing. While some (in other countries) advocate negative interest rates,

"we believe when conducting monetary polices, we should treasure the space left

to conduct normal monetary policies; we pursue normal policies, which are better

for overall economic growth and the people's welfare," Yi said.

     POLICY: China's top planner, the National Development and Reform

Commission, stressed next year's quotas for local government special-project

bonds will be accelerated to boost investment and support growth. The local

government bonds for special projects will finance existing projects in

transportation, energy, eco-environmental protection, logistics, industrial park

and improving people's livelihood and city services, said Ning Jizhe, the

commission's vice chairman.

     LIQUIDITY: The PBOC injected CNY40 billion via 14-day reverse repos. This

resulted in a net injection of CNY40 billion as no reverse repos matured today,

according to Wind Information. 

     The PBOC restarted the 14-day reverse repos operation since last Thursday,

after three months of lapse, to stabilize liquidity and offset the quarter-end

demand for tax payments, government bond issuance and the maturity of cash

management by local treasuries, the PBOC-run newspaper Financial News said. 

     RATES: The seven-day weighted average interbank repo rate for depository

institutions (DR007) decreased to 2.6040% from Monday's close of 2.7357%, Wind

Information showed. The overnight repo average fell to 2.3484% from Monday's

2.7550%. 

     YUAN: The yuan strengthened to 7.1075 against the dollar from Monday's

close of 7.1260. The PBOC set the dollar-yuan central parity rate slightly

stronger to 7.0729 from 7.0734 on Monday.

     BONDS: The yield on 10-year China Government Bonds was last at 3.1175%, up

from the close of 3.0960% on Monday, according to Wind Information. 

     STOCKS: The Shanghai Composite Index edged up 0.28% to 2,985.34. Hong

Kong's Hang Seng Index increased 0.22% to 26,281.00. 

     FROM THE PRESS: Chinese local government authorities may use next year's

quota of bond issuance this year as a result of downward economic pressure, the

China Securities Journal said in a commentary. The issuance of special bonds may

have a limited impact on boosting infrastructure construction in the short term,

the newspaper said.

     China's banks have relatively high profit margins to adjust to the new loan

prime rate (LPR) as the base for lending, even though the new baseline reduces

their profits, the China Securities Journal reported citing unnamed analysts.

The LPR provides basis for loans, bonds and interest rate swaps, the newspaper

added.  

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

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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