MNI China Daily Summary: Tuesday, September 25

     TOP NEWS: China will not resume bilateral trade talks while being

threatened by the U.S., Chinese officials said in Beijing Tuesday, claiming

Washington has not shown enough sincerity in negotiations. "The resumption of

the high-level China-U.S. trade negotiations completely depends on the U.S.,"

said Wang Shouwen, deputy head of the Ministry of Commerce and one of the main

negotiators with the U.S. "China is open to negotiations and talks to tackle

trade conflicts," Wang said, but added that progress will only come when "the

U.S. treats China equally and with mutual respect."

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

14-day reverse repos on Tuesday, as CNY150 billion reverse repos matured,

resulting in a net liquidity drain of CNY90 billion, according to Wind

Information. It is the third trading day the PBOC has drained net liquidity.

CFETS-ICAP's money-market sentiment index closed at 39 on Friday, down from 41

on Thursday.

     YUAN: The yuan fell to 6.8626 against the USD from Friday's closing of

6.8390. Earlier today, the PBOC set the yuan central parity rate weaker at

6.8440, compared with the 6.8357 set last Friday.

     YUAN: USDCNH remains slightly weaker on the day despite the continued rise

in U.S. short-end yields and some weakness in Chinese stocks following

yesterday's market holiday. The CSI failed to hold early gains, dropping back

below the 3400 level to test its 550-dma. The bullish short-term trend remains

intact above the 21-dma at 3306. The yuan and Chinese stocks have showed a

positive correlation over recent weeks and months, and today's combination of

currency strength and equity weakness seems unlikely to be the start of a trend.

     YUAN: It has been a quiet session for USDCNH so far today, with Hong Kong

closed for a holiday. The pair has traded in a tight range giving back some of

yesterday's gains to trade at 6.8630. Yuan crosses are showing some activity

however, with JPYCNH edging lower, at 6.0820 as of 10:11 am, as bears were able

to prevent a break back above neckline support-turned-resistance yesterday.

EURCNH is trading at its daily low of 8.0574 after failing to close above 8.10

yesterday. Support at 8.0 will need to hold to keep the broader uptrend alive.

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

to 2.6851% on Tuesday from 2.6414% Friday, while the overnight average rose to

2.5274% from 2.5120%: Wind Information.

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

3.6750%, down from Monday's close of 3.6752%, according to Wind Information.

     STOCKS: The Shanghai Composite Index closed 0.58% lower at 2,781.14. Hong

Kong's Hang Seng Index dropped 1.62% to 27,499.39.

     FROM THE PRESS: Cooperation is the only choice for China and the U.S.,

according to a white paper issued by the Chinese government and cited by Xinhua

news agency. China has always defended global trade, insisted on tackling

problems through negotiations, and displayed patience and sincerity in its talks

with the U.S., the white paper said. The U.S. has not shown enough respect and

has imposed unilateralism, protectionism and economic hegemony on various

countries, especially China, the white paper said.

     China's state-owned companies are increasingly acquiring private companies

as these experience financial difficulties, 21st Century Business Herald

reported. More deals could be on the way as a result of the significant

contraction in private firms' profits over recent years, employees of large SOEs

working in M&A told the newspaper. Private firms are facing difficulties

including industrial upgrading, increasing costs from stricter environmental

requirements, and a decline in lenders' willingness to provide them with

financing, the newspaper said. Some SOEs are aiming at joining the ranks of the

500 biggest companies in the world, the newspaper said. It also cited academics

saying SOE's operational and management methods will stifle private firms'

vitality, and that takeover targets should be given a six- to 12-month buffer

period to recover financially before deals are approved.

     China needs to strike a balance between deleveraging and stabilizing

economic growth, Securities Times reported. As U.S. trade actions hit China's

economy, stabilising growth is the "priority of priorities" for the country, the

newspaper said. China needs to strengthen rules on local governments' illegal

financing and must steadily reduce leverage of households, it said.

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

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

[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]