MNI China Daily Summary: Wednesday, September 20

     TOPS NEWS: China said Tuesday that it is open to resolving the crisis on

the Korean Peninsula through diplomatic means other than its own "suspension for

suspension" proposal, where the United States and South Korea would stop their

joint military exercises and North Korea would end its nuclear missile program.

China Foreign Ministry Spokesman Lu Kang said President Xi Jinping reaffirmed

China's views on the matter in a phone call with U.S. President Donald Trump on

Monday, and that the two would work together in an attempt to resolve the issue.

     TOP NEWS: The yuan's long-term one-way depreciation trend has ended and it

will show two-way volatility in the future. The rise in the yuan against the

U.S. dollar in the past two months won't occur again, the Chinese Securities

Journal said in a front-page report Wednesday. Although the economy has grown

and capital outflows have relaxed this isn't sufficient to support yuan

appreciation expectations, the report said. Recent rapid appreciation wasn't in

line with the target of stabilizing growth, it said, adding that the People's

Bank of China is trying to halt the yuan's appreciation. (China Securities

Journal)

     POLICY: The downward trend of the property sector could weaken the usual

strong support the sector provides to China's GDP growth, E-House, a

Shanghai-based property consultancy, said Tuesday. Wang Mengwen, a researcher at

E-House, said in an interview with MNI that both property investment growth and

sales growth -- two main contributors of the property sector to GDP growth --

are expected to slow in the second half.

     RATES: Money market rates were higher on Wednesday after the PBOC injected

a net CNY30 billion via open-market operations. The seven-day repo average was

last at 2.9223%, up from Tuesday's average of 2.9079%. The overnight repo

average was at 2.8246% compared with Tuesday's 2.7133%.

     YUAN: The yuan rose against the U.S. dollar on Wednesday even though the

People's Bank of China set a weaker daily fixing. The yuan was last at 6.5670

against the U.S. unit, rising 0.21% compared with the official closing price of

6.5859 on Tuesday. The People's Bank of China set the yuan central parity rate

against the U.S. dollar at 6.5670 Wednesday, weaker than Tuesday's 6.5530.

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

3.5667%, down from the previous close of 3.5724%, according to Wind, a financial

data provider.

     STOCKS: Stocks rose, leading higher by the non-ferrous metals sector. The

benchmark Shanghai Composite Index closed up 0.27% at 3,366.00. Hong Kong's Hang

Seng Index was 0.26% higher at 28,123.65.

     FROM THE PRESS: China has "sticks behind the door" it can use in case the

United States attempts to force concessions out of Beijing when it comes to

trade, the Global Times said in an editorial published Wednesday. The

nationalistic newspaper, commenting on U.S. Trade Representative Robert

Lighthizer's remark on Monday that China's economic model represents an

"unprecedented" threat to the global trade system, said Lighthizer "should

exhibit more common sense, knowing that trade isn't sustainable if one side

keeps profiting from the other." The editorial added: "It is the U.S.'s

degeneration from leader of the international trade system to destroyer-in-chief

that represents an unprecedented threat to global trade."

     The People's Bank of China's balance sheet shrunk again in August as a

result of a reduction in fiscal deposits, the Shanghai Securities News reported

Wednesday. As at the end of August, the balance sheet had decreased CNY346.6

billion month over month to CNY34.71 trillion. It was the third fall this year

after reductions in February and March, the report said. Government deposits

fell CNY532.2 billion. Claims on other depository corporations -- mainly PBOC

monetary policy instruments such as open-market operations and medium-term

lending facilities -- fell CNY520.8 billion for the month, the report said. The

reserve requirement ratio must be cut to meet liquidity demands by financial

institutions, the report said, quoting analysts. (Shanghai Securities News)

     The People's Bank of China's Beijing operations office said Tuesday it

supports commercial banks in Beijing increasing mortgage rates by 5% to 10%

above benchmarks, the Securities Times reported Wednesday. Some banks have

increased mortgage rates -- which is in line with policies for curbing the

property market and strengthening credit support for the real economy, the

office said. Other large cities such as Shanghai, Shenzhen and Nanjing have

increased mortgage rates for first-home buyers, the report said. Most small- and

medium-size banks have raised rates by 10% because of higher capital costs, the

report said. (Securities Times)

     Cross-quarter liquidity is expected to better estimates as fiscal spending

increases and the People's Bank of China accelerates net injections, the China

Securities Journal reported Wednesday. Interbank market liquidity tightened this

week as a result of tax payments but this will pass, the report said. The

approaching National Day holiday and macroprudential assessments will pressure

liquidity, which will prop up money-market rates. Liquidity tightness in July

and August resulted from structural problems in the banking system, the report

said. (China Securities Journal)

--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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