MNI China Daily Summary: Wednesday, December 11

     POLICY: The People's Bank of China (PBOC) will enhance its role in

providing deposit insurance for small and medium-sized banks facing "regional

and structural" liquidity risks, Xinhua news agency reported on Wednesday,

citing an unidentified PBOC official. The PBOC will also ensure timely and

adequate liquidity, the official said, noting that regulators must ensure

lenders are held accountable and strengthen the role of local governments as the

first resort for maintaining stability.

     LIQUIDITY: The PBOC skipped open market operations for the 16th day,

leaving liquidity unchanged as no reverse repos mature today, according to Wind

Information. Total liquidity in the banking system is reasonable and ample, the

PBOC said.

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

institutions (DR007) decreased to 2.3702% from Tuesday's close 2.3724%, Wind

Information showed. The overnight repo average fell to 2.0687% from 2.1838%

yesterday.

     YUAN: The yuan weakened to 7.0386 against the dollar from Tuesday's close

7.0385. PBOC set the dollar-yuan central parity rate lower for the second day at

7.0385, compared with Tuesday's 7.0400.

     BONDS: The yield on 10-year China Government Bonds was last at 3.1850%,

down from Tuesday's close of 3.1950%, according to Wind Information. 

     STOCKS: The Shanghai Composite Index edged up 0.24% to 2,924.42, as finance

and media shares advanced. Hong Kong's Hang Seng Index gained 0.79% to

26,645.43.

     FROM THE PRESS: China's target of stabilizing growth does not necessarily

mean keeping rate above 6%, according to an article in the Beijing News written

by Guan Tao, a former official at the State Administration of Foreign Exchange.

The Chinese government may not take excessive policies in the current downturn

as long as jobs are maintained and incomes continue to rise, said Guan. China

should stabilize growth through reform, not short-term stimulus, Guan said.

     The PBOC may not rapidly increase liquidity to boost M2 money supply given

weak loan demand and rising inflation, the Securities Daily reported citing

analysis from the Bank of Communications. PBOC may use quantitative tools this

month to boost liquidity before early issuances of next year's local government

special purpose bonds, the newspaper said.

     China's CPI is likely to decrease in Q2 due to the stabilization of pork

prices, the Shanghai Securities News reported citing Lian Ping, the chief

economist of Bank of Communications. Recent measures to control pork prices have

eased the gains and may cool inflation, the newspaper cited Lian as saying.

--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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