MNI China Daily Summary: Wednesday, November 15

     TOP NEWS: China could achieve economic growth of 6.4% or even higher in the

next several years, with increasing domestic demand important for both domestic

and world growth, the Economic Information Daily, a newspaper under the official

Xinhua News Agency, said in a commentary Wednesday. An important development

that is underappreciated is that the Chinese import growth rate has been higher

than the export growth rate for 15 months, meaning China has replaced developed

economies as the main pillar for global trade, the newspaper said. China has

also become the main force for global economic growth, with its annualized

average contribution rate to world growth from 2012-2016 at 30.2%, compared with

17.8% for the U.S., 5.3% for Europe, and 3.8% for Japan, the commentary said.

(Economic Information Daily)

     DATA: The foreign-exchange purchase position of the People's Bank of China

edged up in October for the second straight month, reflecting a balanced flow of

forex supply and demand. The PBOC's foreign-exchange position rose CNY2.098

billion to CNY22.22 trillion in October, compared with the CNY850 million

increase in September, according to data from the PBOC released on Tuesday.

     POLICY: China's National Development and Reform Commission on Wednesday

signaled that it is speeding up reform of the state-owned enterprise sector,

confirming that 31 SOEs are to be included in the third round of the

mixed-ownership reform program for the sector. The total of 31 SOEs involved in

the third stage is an expansion of the nine that were involved in the first

stage and the 10 that were involved in the second. As shares of around 50 local

SOEs are suspended on the Shanghai and Shenzhen stock market because of

reorganizations of their important assets or "other important events," more SOE

reform measures are expected, including from the Central Economic Work

Conference, an annual gathering that occurs at the end of the year.

     POLICY: National Development and Reform Commission Spokeswoman Meng Wei

said Wednesday that the NDRC has approved 2,206 corporate bonds worth CNY3.26

trillion over the past five years, a 34.36% increase over the previous five-year

period. Meng said the NDRC has been working to improve the innovation and reform

of corporate bonds, with 16 different types of corporate bonds having been

created.

     POLICY: The performance of both the Chinese and global economy in 2018 will

be better than it was in 2017, as uncertainties including those stemming from

the U.S. presidential election and Brexit fade, Chen Zhiwu, a Yale University

economics professor, said Wednesday during the Caixin Summit, an annual

gathering of business, political and academic leaders. The growth rate of China

in 2018 will fall slightly, considering the policy adjustments made in the

process of financial regulatory tightening, and asset bubbles are expected to be

controlled within an acceptable range via financial deleveraging, which will

benefit future development, Chen argued.

     POLICY: The biggest challenge for China in maintaining economic growth is

managing the shift from old to new economic driving forces, Huang Yiping, an

academic and a member of the Monetary Policy Committee of the People's Bank of

China, said Wednesday at the Caixin Summit. Administrative methods used to

reduce lending costs of companies have not achieved "a good result," and

so-called zombie companies have not been eliminated, dragging the improvement of

productivity, Huang said. The financial sector is still suffering from

insufficient marketization and weak controls over risks, Huang said, adding that

China needs a sound supervisory system to prevent risks in a more precise way.

     LIQUIDITY: The People's Bank of China injected CNY160 billion in seven-day

reverse repos, CNY140 billion in 14-day reverse repos and CNY30 billion in

63-day reverse repos via open-market operations Wednesday. This resulted in a

net injection of CNY220 billion for the day, as a total of CNY110 billion in

reverse repos matured on the day. The PBOC has injected a net CNY510 billion in

liquidity into the interbank market so far this week. A total of CNY340 billion

in reverse repos mature this week. In addition, CNY66.5 billion in Medium-term

Lending Facility (MLF) loans matured on Monday, another CNY122.5 billion in MLF

loans will mature Thursday, while CNY80 billion in treasury deposits will mature

Friday. The CFETS-ICAP money-market sentiment index ended at 51 on Tuesday, the

same as the 51 reading at Monday's close. The lower the reading, the better the

liquidity conditions in the interbank market.

     RATES: Money market rates were mixed Wednesday. The seven-day repo average

was last at 2.9736%, compared with Tuesday's average of 2.9431%. The overnight

repo average was at 2.8153%, compared with Tuesday's 2.8535%.

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

China set the fixing rate stronger for the day. The yuan was last at 6.6322

against the U.S. unit, compared with the official closing price of 6.6431 on

Tuesday. The PBOC set the yuan central parity rate at 6.6263, stronger than

Tuesday's 6.6399. It was the first stronger fixing after two straight days of

weaker fixings.

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

3.9500%, compared with the previous close of 3.9700%.

     STOCKS: Stocks were down, led lower by the property agency sector. The

benchmark Shanghai Composite Index closed down 0.79% at 3,402.52. Hong Kong's

Hang Seng Index was 0.73% lower at 28,939.64.

     FROM THE PRESS: China's announcement that it will lift restrictions on

foreign investors' shares in Chinese banks may not have a dramatic effect in the

short term but its long-term influence will be positive, the Financial News, a

newspaper managed by the People's Bank of China, reported Wednesday, citing

analysts. The new policy means foreign investors can enhance their ownership

shares in Chinese banks and even control a Chinese bank with a majority of

shares, the newspaper said. While there is a chance foreign investors will

become the biggest shareholders in some small- to medium-sized Chinese banks, it

will be hard for them to control large banks, analysts said. Dong Ximiao, a

researcher at the Chongyang Institute for Financial Studies at Renming

University, said the next steps in China's opening up will be furthering yuan

internationalization, improving the development of the offshore renminbi market,

allowing more qualified foreign investors to get financing in the domestic

market, as well as improving China's foreign-exchange management system.

(Financial News)

     Chinese Premier Li Keqiang said Tuesday that in the next five years China's

outbound direct investment would reached $750 billion while foreign direct

investment into China would rise to $600 billion, Xinhua News Agency reported

Tuesday. Li said in a speech to the 20th meeting of the Association of Southeast

Asian Nations (ASEAN), including invited leaders from China, the U.S., South

Korea and Japan, that China would import $8 trillion of goods in the next five

years and that 700 million Chinese would travel overseas. (Xinhua News Agency)

     Several rental property companies are planning to issue "quasi" real estate

investment trusts (REITs), with several expected to be approved soon, the

Economic Information Daily reported Tuesday. With authorities increasingly

supporting the launch of new REITs, standardized public REITs available to all

investors, including individual investors, are likely to come into existence,

the newspaper said. (Economic Information Daily)

Zhou Minyuan, the director of the policy bank department at the China Banking

Regulatory Commission, said at a press conference Wednesday that a new

regulation covering China's three policy banks -- China Development Bank,

Agricultural Development Bank of China and Export-Import Bank of China --

requires them to establish a mechanism to manage their capital based on a

capital adequacy ratio, according to a report from the news website Jiemian.

Zhou provided no other details. (Jiemian)

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

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

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