MNI China Daily Summary: Wednesday, December 25

     LIQUIDITY: The People's Bank of China (PBOC) skipped open market

operations, leaving liquidity unchanged as no reverse repos matured today. Total

liquidity in the banking system is relatively high due to an increase in fiscal

expenditures near the end of the year, PBOC said.

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

institutions (DR007) rose to 2.4346% from 1.5515% on Tuesday, Wind Information

showed. The overnight repo average fell to 0.9290% from 1.0965% on Tuesday.

     YUAN: The yuan strengthened to 6.9823 against the dollar from 7.0075 on

Tuesday. PBOC set the dollar-yuan central parity rate lower at 7.0067 from

7.0119 on Tuesday.

     BONDS: The yield on 10-year China Government Bonds was last at 3.1625%,

down from the close of 3.1725% on Tuesday, according to Wind Information.

     STOCKS: The Shanghai Composite Index gained 0.03% to 2,981.88. Hong Kong's

Hang Seng Index lost 0.15% to 27,864.21.

     FROM THE PRESS: PBOC may cut banks' reserve requirement ratios in January

to fill a liquidity gap given the issuance of local government bonds and greater

demand for cash before the Chinese New Year, the Securities Daily reported

citing analysts including Pan Helin, executive dean of the Institute of Digital

Economy, Zhongnan University of Economics and Law. The gap may exceed CNY3.5

trillion after accounting for the maturity of CNY600 billion of reverse repos

and CNY257.5 billion targeted medium-term lending facility, the newspaper said.

     China is allowing some cites or counties under greater debt pressure to

issue local government bonds to replace some implicit debt as pilot projects in

Guizhou, Yunnan, Hunan, Gansu, Inner Mongolia and Liaoning provinces, the 21st

Century Business Herald reported citing unidentified sources. Some market

participants estimate that the scale of hidden debt is as much as CNY40

trillion, the newspaper added.

     China will strive to prevent risks of large-scale unemployment by helping

businesses lower labor costs and creating more jobs, according to a document

posted on the State Council website on late Tuesday. The government will

strengthen financial support for private and small enterprises, regulate

corporate layoffs and support the development of service industries, according

to the statement.

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

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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