MNI China Daily Summary: Wednesday, November 29

     TOP NEWS: China's economy still faces relatively large downward pressures

and these may become apparent in the first quarter of 2018, Yu Xuejun, chairman

of the Supervisory Board for Key State-Owned Financial Institutions under the

China Banking Regulatory Commission, said Wednesday during the Caijing Annual

Conference in Beijing. The negative effects triggered by previous economic

stimulus and credit expansion are obvious and could easily cause a series of

problems, including assets bubbles, rising debt ratios and a rapid expansion of

financial institutions' balance sheets, Yu warned, adding these problems could

cause new financial system risks. (Caijing Magazine)

     TOP NEWS: The Organization for Economic Cooperation and Development on

Tuesday upgraded its expectations for China's economic growth this year and next

to 6.8% and 6.6%, respectively, from its June forecast of 6.6% and 6.4%, citing

the brisk pace of infrastructure investment and the ongoing rebalancing of

China's growth model. The OECD also said in its twice-yearly "Economic Outlook"

that it expects growth in 2019 to soften to 6.4% as export decelerate.

     RATES: Money market rates fell. The seven-day repo average was last at

2.8913%, lower than Tuesday's average of 2.9202%. The overnight repo average was

at 2.6348%, lower than Tuesday's 2.7728%.

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

reverse repos, CNY70 billion in 14-day reverse repos and CNY10 billion in 63-day

reverse repos via open-market operations. This resulted in a net zero

injection/drain for the day, as a total of CNY240 billion in reverse repos

matured on Wednesday. It was the third straight trading day of net zero

injection/drain.

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

China set a weaker daily fixing. The yuan was last at 6.6015 against the U.S.

unit, compared with the official closing price of 6.5949 on Tuesday. The PBOC

set the yuan central parity rate against the U.S. dollar at 6.6011 on Wednesday,

weaker than Tuesday's 6.5944.

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

3.9600%, up from the previous close of 3.9565%, according to Wind, a financial

data provider.

     STOCKS: Stocks were up, led higher by shares of real estate companies. The

benchmark Shanghai Composite Index closed up 0.13% at 3,337.86. Hong Kong's Hang

Seng Index was 0.09% lower at 29,655.58.

     FROM THE PRESS: China should set its GDP growth target at a lower rate than

last year's 6.5%, to allow the country to pursue more structural reforms, Bai

Chongen, a member of the Monetary Policy Committee of the People's Bank of

China, said at the Caijing Annual Conference on Tuesday, the Economic

Information Daily reported Wednesday. China's economy only needs to expand by an

average of 6.3% to realize its target of doubling the size of the economy

between 2010 and 2020, Bai said. (Economic Information Daily)

     China should boost lending and other financial services for the

construction of rental properties to help advance its policy of supply-side

reform of the housing sector, the China Securities Journal said in a commentary

Wednesday. While a dozen pilot projects have been introduced in cities including

Guangzhou, Shenzhen and Beijing, the rental housing industry is still too weak

and lacks sufficient financial backing, the commentary said. The size of China's

rental property market is CNY1.1 trillion, or only 7% of total property

transactions, compared with a ratio of more than 40% in more mature markets like

the U.S. and Japan, the commentary said. There should be more involvement by

commercial banks and real estate investment trusts, it said. (China Securities

Journal)

     Nine Chinese provinces will begin collecting water resource taxes to help

conserve water and curb unreasonable usage, the People's Daily reported on

Wednesday. Starting Dec. 1, provinces including Beijing, Henan and Shandong will

levy higher taxes on ground aquifers, on areas where water resources are

depleted, and on amounts that exceed allotments, the daily said. (People's

Daily)

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

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

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