MNI China Daily Summary: Wednesday, January 17

     TOP NEWS: Attention is on China's key GDP data release on Thursday at 15:00

Beijing time that will also include industrial output, fixed-asset investment,

retail sales and real estate sales & investment figures. MNI survey indicate

analysts generally expect a mild slowdown in the fourth quarter, with the median

estimate at +6.7% vs +6.8% in Q3. Ahead of the release, MNI outlines '5 Things

To Look For' in the GDP data that are likely to create any surprises. 

     DATA: China's outbound direct investment (ODI) in non-financial sector

slumped 29.4% y/y to $120.08 billion, data by Ministry of Commerce on Tuesday

showed. 

- "Unreasonable" outbound investment was effectively curbed under China's strict

controls to prevent risks that could endanger its domestic economy: ministry 

- Chinese companies made 341 acquisitions in 49 countries, totaling $96.2

billion 

- FDI growth accelerated to 7.9% Y/Y to CNY877.56 billion from 4.1% in 2016. In

December, the volume decreased 9.2% to CNY73.94 billion, much lower than the

90.7% y/y reported in November.

     LIQUIDITY: PBOC injected CNY100 billion in 7-day reverse repos, CNY90

billion in 14-day reverse repos, CNY10 billion in 63-day reverse repos in Open

Market Operation (OMO) on Wednesday.

- Net CNY100 billion injection after CNY100 billion reverse repos mature 

- CFETS-ICAP money-market sentiment index ended at 67 on Tuesday, up from 52 on

Monday's close 

     RATES: Money market rates were lower after PBOC injected a net of CNY100

billion via its open-market operations. 

- 7-day repo average was last at 2.8191%, down from Tuesday's average of

2.8978%. 

- The overnight repo average was at 2.7445% compared with Tuesday's 2.7955%.

     YUAN: The yuan gained against the U.S. dollar after the People's Bank of

China set a stronger daily fixing. 

- The yuan was last at 6.4387 against the U.S. unit, dropping 0.03% from the

official closing price of 6.4366 yesterday 

- PBOC set yuan central parity rate vs U.S. dollar at 6.4335 on Wednesday,

stronger than Tuesday's 6.4372. 

- Today's fixing is the strongest since Dec. 10, 2015.

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

3.9600%, up from the previous close of 3.9550%, according to Wind.

     STOCKS: Stocks rose in Shanghai, led by financial trust shares, with Anxin

Trust & Investment Co. led the gain. The benchmark Shanghai Composite Index

closed up 0.24% at 3,444.67. Hong Kong's Hang Seng Index was down 0.11% at

31,868.46.

     FROM THE PRESS: The Chinese yuan may further appreciate, but its current

gain doesn't mean China's objective of keeping a stable exchange rate is

changing, China Securities Journal said in a commentary Wednesday. 

- Yuan's gain since mid-Dec is due to the weakening of the U.S. dollar: paper 

- Market expectation and investors' behaviors may accentuate the short-term

swing: newspaper 

- Difficult for yuan to repeat last year's 6% gain; outlook is mixed: newspaper 

***TAKEAWAY: The commentary by the official security newspaper suggests the

central bank will seek to maintain stability of the yuan and guide market

expectation to minimize high volatilities.

     China regards the yuan's gain against the U.S. dollar secondary to its

stability vs a basket of currencies, PBOC's Financial News newspaper reported

citing unidentified sources. 

- PBOC needs not to set limits for the minimum or maximum of the yuan exchange

rate against the U.S. dollar: newspaper citied sources 

- Euro's strength contributed to the weakening of the dollar: Financial News 

- Yuan's stable rise helps its internationalization, including more use in

global trade and investment, appeal of yuan-denominated bonds, greater yuan

allocation in other foreign nation's FX reserves: newspaper cited sources. ***

TAKEAWAY: Financial News seems positive on yuan's outlook. PBOC may see a

stronger yuan could help China's desire to widen the global use of the yuan.

     China banking regulators are targeting this year large financial entities

created illegally with complicated structures and irregular investment

activities, China Banking Regulatory Commission Chairman Guo Shuqing was citied

as saying by Wednesday's People's Daily. 

- Stability of China's financial sector threatened by factors including

non-performing bad assets, shadowy transactions and illicit activities: Guo -

Regulators' key tasks are to strengthen risk controls, continue with

deleveraging programs targeting corporate and household debt, curb property

bubbles, and tackle the local government debt problem: Guo 

***TAKEAWAY: Regulators still see great risks in the banking sector and

financial activities will remain limited by close scrutiny.

     China's housing authorities reiterated that it would "resolutely" enforce

curbs on the property sector, and that media reports that some cities loosened

controls were misinterpretation of government measures: Ministry of Housing and

Urban-Rural Development website. 

- Last week, some Chinese newspapers reported cities including Lanzhou had

loosened restrictions on home purchases. 

***TAKEAWAY: While China's central government keeps the tight lid on the

property market, regional authorities concerned with slowing growth will seek to

bend rules. See MNI story: China's Property Market Defies Doom Predictions

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

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