MNI China Daily Summary: Wednesday, November 28

     TOP NEWS: Liquidity remained ample across China's interbank market in

November, despite the People's Bank of China(PBOC) refraining from reverse repo

operations for 24 straight trading days, with 12 out of 17 traders in the latest

MNI China Liquidity Survey seeing conditions unchanged from October. The Survey

shows 70.6% of respondents saw liquidity unchanged, up from 53.3% in October,

where conditions were already deemed quite loose. But there was some divergence

from last month's reading, with 17.6% of participants seeing conditions tighten,

up from zero.(See full story: https://www.marketnews.com/node/1840010)

     OUTLOOK: China's GDP growth is seen 6.6% y/y this year, while growth in

2019 is expected to slow to around 6.5%, Bank of China said in an outlook report

published Wednesday. China' economy is in a critical period of "great

adjustment", where different industries and regions, the real economy and

finance are undergoing major changes and integrations. This period will last for

another three to five years, BOC say, and policymakers should stay alert to

external headwinds, such as the trade dispute and a slowing global economy. The

combined effect of domestic trouble along with external shocks could lead to a

sharp fall in growth, the report says.

     POLICY: The Ministry of Industry and Information Technology and three other

policy planners co-published a three-year plan Wednesday to promote the

synergetic development of larger enterprises and SMEs, the ministry's website

announced Weds. The central government will invest CNY10 billion over three

years to support 200 high-quality economic development zones to build innovative

and entrepreneurial platforms, bringing in different sizes companies to

coordinate with each other, the document said. The plan aims to create a new

type of industrial ecology, where large and medium/small-sized companies will

share capacity and supply chains, whilst innovating together, said Wang

Jiangping, deputy director of the Ministry.

     LIQUIDITY: The PBOC skipped open market operations (OMOs) for a 24th

straight trading day Wednesday, leaving liquidity unchanged as no reverse repos

mature, according to Wind Information. The central bank said increased month-end

fiscal expenditure will push up total liquidity in the banking system.

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

institutions (DR007) increased to 2.6533% from Tuesday's close of 2.6417%, Wind

Information showed. The overnight repo average decreased to 2.5035% from

Tuesday's 2.5479%.

     YUAN: The yuan depreciated to 6.9533 against the U.S. dollar from Tuesday's

close of 6.9485. The PBOC set the dollar/yuan central parity rate at 6.9500

Wednesday, higher than Tuesday's 6.9463.

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

3.3900%, down from the closing price of 3.3975% on Tuesday, according to Wind

Information.

     STOCKS: The benchmark Shanghai Composite Index closed 1.05% higher at

2,601.74. Hong Kong's Hang Seng Index increased 1.33% to 26,682.56.

     FROM THE PRESS: Fiscal policy should play a greater role in stabilizing

economic growth, and there is still room for the government to increase its

deficit/GDP ratio, the Economic Information Daily reported Wednesday, citing Yu

Yongding, a member of the Chinese Academy of Social Sciences. Policymakers can

break the 3% deficit-to-GDP ceiling if necessary, and fiscal expenditure should

further increase to support infrastructure investment, the Daily said, citing

Yu. Although China's financial system is still relatively fragile, there are

sufficient tools to stabilize the financial system, the report added citing Yu.

(Link to the story: https://bit.ly/2rhbH9P)

     In the last month, banks have established 28 Credit Risk Mitigation

Warrants(CRMWs) worth CNY3.6 billion to cover private enterprise bond issuance

totalling around CNY10 billion, the Economic Information Daily said Wednesday.

When there is a default in those private corporate bonds, CRMW underwriters are

required to either pay compensation to investors for losses or buy the bond at

the original price, the Daily said. With the backing of CRMWs, private-sector

financing costs have seen an obvious decline, with lower interest rates on bond

issues, the paper said. (Link to the story: https://bit.ly/2QqA96s)

     Cooling home sales has dampened real estate developers' willingness to

invest in new projects, the 21st Century Business Herald reported Wednesday,

citing data released by the National Bureau of Statistics. The indicator, a

gauge of developers' new investment intentions, recorded still strong 34.2% y/y

growth from January to October, slowing 1.7pp from the Jan-Sept period, the NBS

data showed, according to the paper. New investment intentions in 17 cities --

mainly tier 1 and 2 cities in East China including Guangzhou and Shenzhen --

recorded negative growth, while the main cities in Middle and Western China saw

buoyant growth, the newspaper said. (Link to the story: https://bit.ly/2FLKOof)

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

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

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