MNI China Daily Summary: Wednesday, February 14

     TOP NEWS: Tensions regarding trade between China and the US are expected to

increase, and China will prepare to deal with these tensions to protect the

legal interests of domestic companies, according to a report in the Economic

Information Daily. The report also stressed that a trade war is not a rational

choice for both China and the US, and both countries need to understand the

current imbalance of their bilateral trade and try to solve that imbalance by

negotiation.

     LIQUIDITY: The PBOC skipped its Open Market Operations (OMO), stating on

its website that the liquidity in the banking system is at a "relatively high"

level. Today was the 16th consecutive trading day that the central bank has

refrained from conducting OMO. Liquidity conditions remain unchanged as no

reverse repo matures today. Net injection of CNY393 billion into the banking

system this week, taking into account both reverse repos and medium-term lending

facilities (MLF)

     RATES: Interbank market rates diverged after PBOC skipped its open market

operations and left liquidity conditions unchanged. The 7-day repo average last

at 2.8267%, lower than 2.8317% Tuesday. Overnight repo average at 2.7172%, much

higher than 2.5709% yesterday.

     YUAN: The Chinese yuan strengthened to 6.3405 against the U.S. dollar from

Tuesday's 6.3440 closing, following today's much weaker fixing. PBOC set the

yuan central parity rate vs the U.S. dollar at 6.3428 on Wednesday, much weaker

than Tuesday's 6.3247.

     BONDS: Yield on 10-year China Government Bond last traded 3.8825%, down

from 3.8850% at close Tuesday: Wind Information.

     STOCK: The Shanghai Composite Index closed up 0.45% to 3199.16, while Hong

Kong's Hang Seng Index was last at 30,377.56, up 1.80%.

     FROM THE PRESS: The total issuances of local government bonds will be

around CNY4 trillion in 2018, Shanghai Securities News reported, citing analysts

familiar with this issue. The new bonds issued to replace outstanding loans will

be around CNY1.8 trillion, and new local government bonds issuance will likely

amount to around CNY2 trillion, the report said. Solving the risks of existing

local government debt and controlling new issuances of local government debts

will be important tasks for local governments in 2018 to prevent debt risks, the

report said.

     The State Administration of Foreign Exchange (SAFE) published a statement

on Tuesday notifying banks and clients that they could settle their forex

forward contracts by either gross settlement or net settlement, based on

clients' real needs, said a report on Shanghai Securities News. The net

settlement will use yuan to settle, the statement said, according to the report.

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

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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