MNI China Daily Summary: Wednesday, August 30

     TOPS NEWS: Moody's Investors Service has upgraded its economic growth

forecasts for China and the world's G-20 economies this year and next, pointing

to a "synchronized global economic expansion" that the ratings service expects

to last through 2018. In its Global Macroeconomic Report released Wednesday,

Moody's revised China's 2017 forecast to 6.8%, from the previous 6.6%, and said

growth in 2018 would be 6.4%, up from its previous 6.3% forecast. It based the

upgrade on China's stronger-than-expected growth of 6.9% in Q1 and Q2 this year,

which it attributed largely to strong infrastructure spending. Despite the

upgrade, China's growth is expected to decelerate gradually over the next few

years "as less policy stimulus is provided and as the authorities seek to

balance their renewed commitment to slowing the growth of leverage while

continuing to meet growth targets," Moody's said.

     CHINA DATA: The State Administration of Foreign Exchange (SAFE) approved a

net $720 million worth of investment quotas under the Qualified Foreign

Institutional Investor (QFII) program in August, according to Market News

International calculations based on SAFE numbers released Monday. The figure was

higher than the $500 million approved in July. SAFE did not approve new

investment quotas under its Qualified Domestic Institutional Investor (QDII)

program for the 21st consecutive month. As of the end of August, QDII quotas

stood at $89.99 billion. SAFE also approved a net CNY36.62 billion worth of

investment quotas under the Renminbi-QFII (RQFII) in August, compared with a net

CNY5.14 billon in July.

     Rates: The People's Bank of China injected CNY80 billion in seven-day

reverse repos and CNY50 billion in 14-day reverse repos via open-market

operations Wednesday, Wind Information, a Shanghai-based financial data

provider, said. This resulted in a net drain of CNY100 billion for the day, as a

total of CNY230 billion in reverse repos matured on Wednesday.

     RATES: Money market rates were lower on Wednesday after the PBOC drained a

net CNY100 billion via its open-market operations. The seven-day repo average

was last at 2.8536%, much lower than Tuesday's average of 2.9322%. The overnight

repo average was at 2.9239%, compared with Tuesday's 2.9622%.

     YUAN: The yuan strengthened against the U.S. dollar Wednesday after the

People's Bank of China set a stronger daily fixing. The yuan was last at 6.5867

against the U.S. unit, rising 0.16% compared with the official closing price of

6.5975 on Tuesday. The People's Bank of China set the yuan central parity rate

against the U.S. dollar at 6.6102 Wednesday, stronger than Tuesday's 6.6293.

     BONDS: The yield on benchmark 10-year China government bonds was last at

3.5965%, down from the previous close of 3.6086%, according to Wind, a financial

data provider.

     STOCKS: Stocks fell, led lower by the environmental protection and

financial service sectors. The benchmark Shanghai Composite Index closed down

0.05% at 3,363.63. Hong Kong's Hang Seng Index was 1.09% higher at 28,067.53.

     FROM THE PRESS: The tight money supply in recent weeks is not necessarily a

bad thing, the China Securities Journal argued in a commentary Wednesday.

Especially in the past two weeks, liquidity has been unexpectedly tight, partly

because of banks' low excess reserve ratios. The People's Bank of China's

restraining from injecting much liquidity into the market under such

circumstance may have the aim of avoiding a rebound in banks' leverage ratios or

act as a warning about a rebound in banks' issuance of negotiable certificates

of deposit that took place in July, the newspaper said. Though liquidity is

tight and the central bank is acting tough, it will motivate financial

institutions to better manage their liquidity and control leverage, the

newspaper argued. (China Securities Journal)

     The yuan's recent appreciation against the dollar is beyond the

expectations of experts, but there are uncertainties whether the strengthening

can be sustained, the Economic Information Daily said in a front-page

commentary. The appreciation is mainly due to the weakening of the dollar, which

is related to uncertainties about Trump administration policies, the report

said. If the policies proposed by President Trump to stimulate the U.S. economy

are implemented, the dollar could rise to some extent, placing pressure on the

yuan exchange rate, the newspaper argued. Better management of yuan expectations

is the key to improving the exchange rate system this year, the newspaper

stressed. Only when the market sees the yuan fluctuate against a basket of

currencies with some pattern and rules can the credibility of exchange rate

policies be enhanced and unreasonable expectations be eliminated, it said.

(Economic Information Daily)

     Chinese Finance Minister Xiao Jie has stressed the need to tackle financial

risks, especially those caused by local-government debt and to curb illegal debt

issues, the People's Daily reported Wednesday. During a meeting of the Standing

Committee of the 12th People's Congress, Xiao said China needs to further

overhaul the income and spending relationship between local governments and the

central government. He also said China needs to use more high-quality assets to

attract investment to public-private partnership projects. (People's Daily)

     Local governments in China are reluctant to disclose their fiscal

situations, and especially their debt conditions, a report by a research center

of the Tsinghua University School of Public Policy and Management said, the

China Economic Weekly reported. The research rated the average score on

transparency of local government debt disclosure at 20 out of a possible 100,

reflecting "poor disclosure," the report said. Yu Qiao, leader of the research

group, told the magazine that the central government's threat to hold officials

accountable makes local governments "very sensitive" toward disclosing their

debt details. Outside of debt, disclosure of fiscal conditions in 295 cities the

center monitored produced an average score of 49.33 out of 100 this year, higher

than the 44.62 last year. (China Economic Weekly)

--MNI Beijing Bureau; +86 10 85325998; email: he.wei@marketnews.com

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

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