MNI China Daily Summary: Wednesday, July 18

     LIQUIDITY: The People's Bank of China (PBOC) injected CNY60 bn via its

7-day reverse repos and CNY20 bn via its 14-day reverse repos on Wednesday to

cushion the impact of tax payments, government bonds issuance payments and to

maintain liquidity at a proper and sufficient level. The PBOC injected a net

CNY80 bn as no reverse repos are maturing today, according to a statement on the

central bank's website. CFETS-ICAP's money-market sentiment index closed at 37

on Tuesday, sharply down from 47 on Monday.

     MONEY MARKET RATES: The benchmark 7-day deposit repo average fell to

2.6622% on Wednesday from 2.6810% on Tuesday; the overnight average decreased to

2.4934% from 2.5602% on Tuesday: Wind Information.

     YUAN: The yuan weakened to 6.7080 against the U.S. dollar on Wednesday from

Tuesday's 6.6790 closing, following today's weaker fixing. The PBOC set the yuan

central parity rate at 6.6914, the lowest since August 9, 2017. The central bank

has set the fixing weaker for seven trading days out of the past ten. USDCNH has

broken through resistance, currently trading at 6.7358, but off its highs of

6.7440. There is little in the way of further resistance for the pair until

6.9000, which marks the measured move implied by the breakout from the July

trading range.

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

3.4775%, down from the previous close of 3.4800%, according to Wind Information.

     STOCKS: Shares in Shanghai hovered around the 2800 level in the afternoon

and eventually fell below that mark. The Shanghai Composite Index closed 0.39%

lower at 2787.26, marking a fourth consecutive day of decline. Hong Kong's Hang

Seng Index fell 0.20% to 28124.64. Shares of Xiaomi rose by over 4% after Hong

Kong's stock exchange said it had made an agreement with mainland stock

exchanges to allow weighted voting right shares in the stock connect program.

     TOP NEWS: China will enhance the flexibility of macroeconomic policies to

boost domestic demand and ensure the stability of economic growth as

uncertainties surrounding the global economy are intensifying, the National

Development and Reform Commission (NDRC) -- China's leading economic planning

body -- said in a press conference late Tues.

     FROM THE PRESS: Fiscal revenue growth is likely to slow down in the second

half of the year amid the increasing uncertainties in international trade as

well as the implementation of tax and fee cuts, Xinhua News Agency reported,

citing Lou Hong, director of the Ministry of Finance's Treasury Department.

However, financial operations overall remain stable and the annual fiscal

revenue growth goal is still achievable, Lou said. Active fiscal policy should

inject certainty into the market and guide social expectations to stabilize the

real economy, consumption and employment, Xinhua said, citing Liu Shangxi, head

of the Chinese Academy of Fiscal Sciences. In order to achieve these goals,

fiscal policy has to be to clear, targeted and comprehensive, Liu said.

     Short-term liquidity has slightly tightened as the peak of the tax season

approaches, but overall capital supply and demand are balanced, the China

Securities Journal (CSJ) reported. Early July saw high levels of liquidity, thus

the PBOC continued using open market operations to drain liquidity, leading it

back to a "proper and sufficient" range, the CSJ said. Liquidity is likely to be

more ample than last year with lower average money market rates and less

volatility at the end of each quarter, while money market rates and ultra-short

bond rates have almost bottomed, the CSJ added.

     The State-owned Assets Supervision and Administration Commission (SASAC)

has announced plans to restructure some central state-owned enterprises in the

second half of the year, Shanghai Securities News reported. The aim is to

promote the concentration of state-owned assets in targeted strategic

industries, including electric power, machinery and autos, the newspaper said.

The SASAC is hoping that the restructuring will promote industrial

transformation and upgrading, the newspaper said. Decentralized services will be

transferred to dominant enterprises in order to integrate each specialization,

the newspaper added.

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

--MNI London Bureau; +44 207-862-7489; email: ukeditorial@marketnews.com

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

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