MNI China Daily Summary: Wednesday, August 29

     TOP NEWS: China's banks are caught between competing official priorities,

with policymakers insisting they rein in risky loans while also encouraging

fresh lending to the private sector as trade tensions threaten growth, MNI

understands from high-ranking officials and bankers. "China's banking sector is

likely to see a renewed rise in non-performing assets exposure, especially given

that large-scale monetary stimulus is not feasible at this time, and strict

regulation is set to be the new normal in future," Yu Xuejun, chairman of the

supervisory board for key state-owned financial institutions at the China

Banking and Insurance Regulatory Commission, told bankers at a forum in Beijing.

     LIQUIDITY: The People's Bank of China skipped open market operations on

Wednesday, stating on its website that a steady increase in month-end fiscal

spending should offset the liquidity drain from local government bond issuance.

The PBOC's inaction resulted in no change in liquidity, as no reverse repos

matured today, according to Wind Information. No reverse repos will mature over

the rest of this week. CFETS-ICAP's money-market sentiment index closed at 36,

up from 32 on Tuesday.

     YUAN: The yuan slid to 6.8200 against the U.S. dollar from Tuesday's

closing of 6.8070. The PBOC earlier set the yuan central parity rate at 6.8072,

pulling back from the 18-day high of 6.8052 set on Tuesday.

     MONEY MARKET RATES: The benchmark 7-day deposit repo average dropped to

2.6326% from 2.6333 on Tuesday; the overnight average decreased to 2.3770% from

2.3951%: Wind Information. 

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

3.6100%, unchanged from the previous close, according to Wind Information. 

     STOCKS: The Shanghai Composite Index closed 0.31% lower at 2,769.29. Hong

Kong's Hang Seng Index was barely changed at 28,351.66. 

     FROM THE PRESS: China should do more to curb risks from local government

debt, Finance Minister Liu Kun said, according to official news agency Xinhua.

Authorities will clamp down on illegal practices in public-private partnerships,

local government investment funds and purchasing of services, Liu said. The

central government will also further restrict unviable local projects and speed

up plans and guidance for the market-based transformation of financing vehicles,

he said.

     Tighter property market regulations are expected to affect sales and

housing prices in the usually busy "Golden September" and "Silver October"

periods, Securities Daily reported. The authorities must tackle property market

irregularities and prevent house prices from rising, the Head of the National

Development and Reform Commission He Lifeng said on Tuesday, according to the

Daily. A drive by seven governmental departments to clamp down on illegal

practices, which started in June, will last until December. Property policies

will meanwhile remain tight and the market is likely to cool, the newspaper

said, citing an analyst from E-house Real Estate Research Institute.

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

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

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