MNI China Daily Summary: Wednesday, August 14

     DATA: China faces increased economic downward pressure, as all July

macroeconomic indicators came in below market expectations, coming down from the

one-off strong performance in June. Industrial output growth slowed to 4.8% y/y

from 6.3% in June, the lowest level this year, and missing the 5.7% projected by

analysts polled by MNI. Fixed-asset investment was somewhat stable, gaining 5.7%

y/y in Jan-July, down from 5.8% in the first six months, and missing the 5.8%

MNI forecast. Retail sales grew by 7.6% y/y, falling sharply from June's

16-month high of 9.8%, and missed the 8.5% forecast polled by MNI. This is the

lowest level in three months since April's 16-year low of 7.2%.

     LIQUIDITY: The People's Bank of China (PBOC) injected CNY100 billion via

7-day reverse repos, adding liquidity for the third day. This resulted in a net

injection of CNY100 billion as no reverse repos matured, according to Wind

Information. The injection aims to offset the tax season and keep liquidity in

the banking system reasonable and ample, PBOC said.

     RATE: The 7-day weighted average interbank repo rate for depository

institutions (DR007) fell to 2.6965% from Tuesday's close of 2.7379%, Wind

Information showed. The overnight repo average increased to 2.6911% from

Tuesday's 2.6819%.

     YUAN: The yuan strengthened to 7.0165 against the dollar from Tuesday's

close of 7.0669. The PBOC set the dollar-yuan central parity rate lower at

7.0312, compared with 7.0326 set on Tuesday.

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

3.0050%, up from 3.0025% on Tuesday, according to Wind Information.

     STOCKS: The benchmark Shanghai Composite Index rose 0.42% to 2,808.91. Hong

Kong's Hang Seng Index increased 0.08% to 25,302.28.

     FROM THE PRESS: The PBOC is likely to conduct medium-term lending facility

(MLF) to offset the maturity of MLFs in mid-August and increase liquidity, the

China Securities Journal reported. The monetary conditions will need to be

relaxed as the total social financing is likely to decline, the newspaper said,

citing a report by CICC. The PBOC may cut the reserve requirement ratio for

medium and small banks in Q3, the newspaper added citing Minsheng Securities.

     A number of Chinese property developers redeemed more than $1 billion in

overseas financing in advance, due to the increasing capital costs amid the

recent depreciation of the yuan currency against the U.S. dollar, the Economic

Information Daily reported. If the yuan continues to fall, it could lead to bond

defaults by developers, the newspaper said citing Zhang Dawei, chief analyst at

Centaline Property. For the first seven months this year, developers have issued

a total $58.8 billion of U.S. dollar bonds with interest rates exceeding 10%,

the newspaper said.

     China's mortgage loan market is expected to shrink and mortgage interest

rates may rise in some cities as regulations tighten, the China Securities

Journal reported. Citing several analysts, the newspaper reported that a number

of second-tier cities including Dalian, Suzhou, Hangzhou and Ningbo have raised

first-home mortgage rate, while those in first-tier cities remain stable.

--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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