MNI China Daily Summary: Wednesday, July 31

     LIQUIDITY: Liquidity tightened across China's interbank market in July,

driven by net drains by the Peoples' Bank of China (PBOC), the latest MNI China

Liquidity Survey showed. MNI's Liquidity Conditions Index jumped to 64.3 in

July, which reflects 57.1% respondents reporting tighter liquidity this month.

The higher the index, the tighter liquidity appears to market participants. This

reflects a very different situation from the ample liquidity seen in June when

the index stood at just 8.3 and no traders reported tight conditions. July's

tighter liquidity was also a reaction to market caution following the

interventions at Baoshang Bank and Jinzhou Bank, one commercial bank trader told

MNI.

     LIQUIDITY: The PBOC skipped open market operations (OMOs) for the seventh

day, leaving liquidity unchanged as no reverse repos matured, according to Wind

Information. Liquidity in the banking system is reasonable and ample, said the

PBOC.

     DATA: PMI rebounded for the first in three months to 49.7 in July from 49.4

in June, according to data released by the National Bureau of Statistics. The

score beat the forecast of 49.6 by analysts polled by MNI. The index remained in

the contractionary zone for the third month. The gauge rose mainly due to the

accelerated expansion of production and improved market demand, the stats bureau

said.

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

institutions (DR007) rose to 2.6944% from Tuesday's close of 2.6712%, Wind

Information showed. The overnight repo average increased to 2.6570% from

Tuesday's 2.6158%.

     YUAN: The yuan weakened to 6.8855 against the dollar from Tuesday's close

of 6.8845. The PBOC set the dollar-yuan central parity rate lower at 6.8841

today, compared with 6.8862 on Tuesday.

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

3.1540%, down from Tuesday's close of 3.1800%, according to Wind Information.

     STOCKS: The benchmark Shanghai Composite Index fell 0.67% to 2,932.51. Hong

Kong's Hang Seng Index decreased 1.31% to 27,777.75.

     FROM THE PRESS: China's Communist Party Politburo on Tuesday left the tone

of China's fiscal and monetary policy unchanged, but hinted more new measures

may be taken in the second half, the China Securities Journal said in a

post-meeting commentary. The meeting didn't mention deleveraging, instead

emphasized that banks should be guided to increase medium- and long-term

financing for the manufacturing sector and private companies, the newspaper

said.

     China will abandon strong stimulus and boost consumption and stimulate

demand to stabilize the growth in the short term, while aiming for high-quality

long-term growth through reform, the Securities Times said in a front-page

commentary today. More importantly, the meeting said for the first time that

"China should not use the property market as a short-term means of stimulating

the economy", indicating neither housing regulation or the tight financing

conditions for property developers will be relaxed, the paper said.

     Some in the U.S. should not have unrealistic expectations that China will

make concessions without principle in the trade talks, the People's Daily said

in a commentary on what it described as attempt by some U.S. politicians to

blacken China's name. The official newspaper urged the U.S. to show sincerity

and look at the common interests between the two countries if they want a good

outcome from the current round of trade talks.

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

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

[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]