MNI China Daily Summary: Wednesday, October 30

     MNI SURVEY: Liquidity tightened in China's interbank market in October,

with tax payments and control of conditions by the People's Bank of China (PBOC)

all pressuring, the latest MNI China Liquidity Survey showed. MNI's Liquidity

Conditions Index rose to 66.7 in October from 57.1 in September, indicating

moderately tighter conditions than in the previous month, with 9-in-10

respondents reporting liquidity the same or tighter. The higher the index, the

tighter liquidity appears to market participants.

     LIQUIDITY: PBOC skipped open market operations for the third day, draining

net CNY200 billion due to maturing reverse repos, according to Wind Information.

The increased fiscal spending near month-end can offset the maturity of reverse

repos and ensure reasonable and ample liquidity, PBOC said.

     RATES: The seven-day weighted average interbank repo rate for depository

institutions (DR007) increased to 2.6914% from Tuesday's close of 2.6765%, Wind

Information showed. The overnight repo average fell to 2.3000% from Tuesday's

2.3636%.

     YUAN: The yuan strengthened to 7.0584 against the dollar from Tuesday's

close of 7.0637. PBOC set the dollar-yuan central parity rate firmer at 7.0582,

strongest since Aug 26. It was 7.0617 on previous day.

     YUAN: The yuan may rise against the U.S. dollar till mid-2020, supported by

its economy, the China Securities Journal reported citing Yang Weixiao, the

chief analyst at BOC International. Prices of industrial products are expected

to rebound, increasing corporate profits and returns on capital, thereby

propping up the yuan, the newspaper cited Yang as saying. China's economic

growth will stabilize in Q4, compared to the U.S.'s increased downward pressure,

which could weaken the dollar while boosting the yuan, the newspaper said citing

Bian Quanshui, chief analysts at Sinolink Securities.

     BONDS: The yield on 10-year China Government Bonds was last at 3.3125%, up

from the close of 3.3000% on Tuesday, according to Wind Information. 

     STOCKS: The Shanghai Composite Index edged down 0.50% to 2,939.32, with

poultry and automotive shares leading the drop, while chip stocks rose by the

daily trading limit. Hong Kong's Hang Seng Index decreased 0.44% to 26,667.71.

     FROM THE PRESS: The Export-Import Bank of China will grant CNY300 billion

in special funds to support Chinese companies importing products and services

concerning high-end equipment, smart manufacturing and energy, the China

National Radio reported. This can also promote the cross-border settlement of

the yuan, the radio said.

     China plans to let infrastructure-backed so-called special-purpose local

government bonds be used in public-private partnership (PPP) projects, China

Securities Journal reported citing the Ministry of Finance. The use of these

bonds helps boost insufficient government investment funds, while PPPs can

better manage the spending. Such combination will ease fiscal pressure, and

increase the efficiency of fiscal management, the newspaper said citing Jiao

Xiaoping, director of the China Public Private Partnerships Center.

     China has cut total CNY1.78 trillion taxes and fees in the first three

quarters, The Beijing News reported citing the State Taxation Administration.

The amount included CNY1.51 billion tax cuts and CNY272.5 billion of reductions

on companies contribution to social security premiums, the newspaper said.

     China's loan prime rate (LPR) could be lowered by 50 to 114 bps in the next

year, if banks can turn funds in excess of the required loan loss provisions to

profits, said Ming Ming, chief analyst at CITIC Securities in a report. Chinese

banks are required to keep their loan loss provisions, which are set aside for

bad loans, at around 150%, and those with a rate which is double this

requirement are suspected of hiding profits.

     China will focus on promoting the integration of blockchain and industrial

internet to accelerate the digital transformation of the manufacturing sector,

the People's Daily reported citing the Ministry of Industry and Information

Technology. China should also combine blockchain with big data to explore new

digital economy model, the newspaper cited the ministry as saying.

--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

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