MNI China Daily Summary: Wednesday, December 5

     EXCLUSIVE: China's economy is likely to expand by around 6.5% next year,

despite the trade dispute with the U.S., as the government considers

guaranteeing returns on private investment to sustain growth during the lead-up

to a key anniversary for the Communist Party, an economist associated with the

national economic planning body told MNI. Government advisors and former

officials have said growth could fall closer to 6% in 2019 from 6.5% or slightly

higher this year, amid headwinds from the tariffs clash with the U.S. and the

effects of a deleveraging campaign. But the economist, a director at the

Macro-economic Research Institute of the National Development and Reform

Commission, said authorities will be keen to maintain economic momentum ahead of

the 100th anniversary of the Chinese Communist Party in 2021. (See full story:

https://www.marketnews.com/node/1842353)

     TRADE WAR: China will implement any agreements reached with the United

States in the 90-day negotiation period as soon as possible, the Ministry of

Commerce said on its website, calling the weekend meeting between presidents Xi

Jinping and Donald Trump very successful. The 90 days of negotiations between

the two sides will follow a clear road map, the ministry said.

     POLICY: Chinese companies which lay off fewer or no employees will be

eligible for a rebate of 50% of the unemployment insurance they paid last year,

according to the latest employment-boosting policy released by the State Council

on its website on Wednesday. Entrepreneurial guarantee loans will also be

available for up to CNY150,000, the State Council said, announcing another

measure aimed at bolstering the jobs market. Stabilising employment is top of

the Politburo's list of current economic priorities, followed by stabilising

finance, foreign trade and investment.

     DATA: The Caixin services PMI index, which gauges the activities of China's

smaller services companies, jumped to 53.8 in Nov from 50.8 in Oct, hitting a

five-month high, said Caixin, which independently publishes the data. The new

orders sub-index recovered, after stagnation in Oct, growing at a five-month

high but still below the historical average, Caixin said. Many companies said

the improvement of potential demand, the increase in new customers and the

International Import Expo in Nov have boosted new orders. The rebound contrasts

with the official service PMI released last week, which inched up to 52.4 from

52.1 in Oct.

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

(OMOs) for a 29th straight trading day Wednesday, leaving liquidity unchanged as

no reverse repos are maturing, according to Wind Information. The central bank

said total liquidity in the banking system remains at a relatively high level,

which could offset financial institutions' payment of required deposit reserves

and other factors.

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

institutions (DR007) decreased to 2.4390% from Tuesday's close of 2.5622%, Wind

Information showed. The overnight repo average decreased to 2.2020% from

Tuesday's 2.3976%.

     YUAN: The yuan depreciated to 6.8662 against the U.S. dollar from Tuesday's

close of 6.8401. The PBOC set a stronger dollar/yuan central parity rate for a

second day running, at 6.8476 Wednesday, compared with Tuesday's 6.8939.

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

3.3175%, up from the closing price of 3.3100% on Tuesday, according to Wind

Information.

     STOCKS: The benchmark Shanghai Composite Index closed 0.61% lower at

2,649.81. Hong Kong's Hang Seng Index decreased 1.62% to 26,819.68.

     FROM THE PRESS: Chinese authorities are moving to accelerate the

restructuring of zombie companies' debts, requiring local governments to oversee

bankruptcy proceedings, restructurings and mergers and reorganisations when

feasible, the Beijing News reported on Wednesday, citing a document from the

National Development and Reform Commission and 10 other departments. Local

governments are also banned from providing subsidies to sustain zombie

enterprises, the paper said. (Link to the story: https://bit.ly/2RAg1w2)

     Companies which are reluctant to be merged, reorganized or eliminated from

the market during the de-leveraging campaign have slowed down the entire

economic restructuring process, said China Securities Journal on Tuesday night,

citing Fan Gang, director of China's National Economic Research Institute. At

present, the key is how financial institutions, especially equity funds can help

enterprises merge and reorganize, the Journal said, citing Fan. The deleveraging

campaign, which had the effect of slowing the economy, is now operating less

intensively, the newspaper said. (Link to the story: https://bit.ly/2EgYLcc)

     The municipal government of Shenzhen is launching a CNY400 billion plan to

support the private economy, Southern Metropolis Daily reported on Wednesday.

The government pledged to cut the burden of cost and taxes on local enterprises

by at least CNY100 billion, to promote at least CNY100 billion in additional

lending to small and private companies and CNY100 billion in fresh corporate

bond issuance, and to establish a CNY100 billion stable development fund for

promising private firms in line with the national economic restructuring

strategy, the Daily said.(Link to the story: https://bit.ly/2Svt0z9)

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

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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