MNI China Daily Summary: Wednesday, October 10

     TOP NEWS: China's government is considering bigger tax cuts for businesses

and individuals and could apply further stimulus measures if sluggish domestic

demand and trade war with the U.S. threaten to drag growth closer to 6%, a

former research head at the Ministry of Commerce told MNI. While GDP growth may

fall below 6.5% in 2019, the government has tools to ensure the rate of

expansion holds well above 6% over the next two years, said Huo Jianguo, former

head of the research department at the commerce ministry. Such measures could

help support China's economy until the U.S. is readier to compromise in the

tariffs dispute, perhaps if the effect of Washington's fiscal stimulus diminish

from next year, he said.

     LIQUIDITY: The People's Bank of China (PBOC) skipped open market operations

(OMOs) Wednesday, leaving liquidity unchanged due to no maturing reverse repos,

according to Wind Information. Liquidity in the banking system is at a

relatively high level, the central bank said. Wednesday marks the sixth day that

the PBOC had skipped OMOs. The benchmark 7-day deposit repo average decreased to

2.5934% from 2.6064% on Tuesday, according to Wind Information. The overnight

repo average decreased to 2.3802% from Tuesday's 2.4856%.

     YUAN: The yuan ended Tuesday's session at 6.9195 against the U.S. dollar

from Tuesday's closing of 6.9235. The PBOC set the yuan central parity rate

weaker for a seventh straight trading day at 6.9072, compared with 6.9019 on

Tuesday.

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

3.6125%, decreased from Tuesday's close on 3.615%, according to Wind

Information.

     STOCKS: The benchmark Shanghai Composite Index closed 0.18% higher at

2725.84, while Hong Kong's Hang Seng Index increased 0.08% to 26193.07.

     FROM THE PRESS: China should stick with a non-intervention policy in the

the FX market, even if the yuan breaks the key level of 7 against the dollar, Yu

Yongding, a former member of the PBOC Monetary Policy Committee, said in an

article published on the China Securities Journal. Only with such patience can

China succeed in reforming its FX system, Yu said. The yuan is unlikely to

depreciate to a level that triggers a financial crisis, Yu said. He also argued

that the yuan's depreciation in 2015-2016 suggested intervention had serious

consequences, adding that investors need not panic or move capital overseas, Yu

stressed.

     The role of China's SOEs in international competition is overstated, as

major Chinese players are mostly private companies, according to an opinion

piece published in China Daily jointly by Liu Yingqiu, director of the Center

for Private Economic Studies at the Chinese Academy of Social Sciences, and Mei

Xinyu, a researcher at the Chinese Academy of International Trade and Economic

Cooperation affiliated with the Ministry of Commerce. The state-backed academics

provided unofficial responses to criticisms that Chinese SOEs create an uneven

playing field for market competition, a contentious issue in the ongoing trade

conflict with the U.S. The government doesn't need to repeatedly explain itself

or cave in to foreign powers to rewrite trade rules, wrote Mei, a researcher who

often expresses hardline views on trade issues.

--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

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