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Headline shares of the Mainland China equity market advanced on Friday, 11 January 2019, as risk sentiments improved amid signs of progress between the world's two biggest economies and Chinese policymakers continuing efforts to arresting the slowdown in the world's second-largest economy, as further details emerged of measures to ensure credit to small businesses and ease their tax burden. In late afternoon trade, the benchmark Shanghai Composite Index gained 0.1%, or 2.88 points, to 2,537.98. The Shenzhen Composite Index, which tracks stocks on China's second exchange, rose 0.05%, or 0.70 points, to 1,304.18. The blue-chip CSI300 index was up 0.1%, or 2.67 points, to 3,075.36.

Chinese policymakers are continuing their efforts to arresting the slowdown in the world's second-largest economy, as further details emerged of measures to ensure credit to small businesses and ease their tax burden. Late Wednesday, the government announced a package of tax cuts for small and micro-sized businesses — the backbone of the economy — worth 200 billion yuan (US$29 billion) per year over the next three years. That's consistent with a modest increase in the targeted budget deficit for this year and matches the aim of a new targeted funding tool that the central bank announced will start this month. As China and the United States inch toward a possible deal in negotiations over their trade standoff, incoming domestic data have pointed to a sharper slowdown in the first quarter, with even the nation's households tightening their belts — auto sales posted their first annual drop in decades in 2018. At the same time, officials are refraining from full-scale stimulus due mainly to concerns over debt levels and financial stability. The decision to cut corporate income tax, value-added tax and other corporate taxes was announced after a State Council meeting Wednesday. It came right after the central bank said its new program to encourage banks to lend to small and private firms would begin later this month.

On the trade front, China and the United States made progress on “structural issues” such as forced technology transfers and intellectual property rights in talks this week and more consultations are being arranged, China's commerce ministry said on Thursday. The three-day talks in Beijing that wrapped up on Wednesday were the first face-to-face negotiations since US President Donald Trump and his Chinese counterpart, Xi Jinping, met.

NEWS FROM THE PRESS: Trade spat cuts US LNG exports to China -- The number of U.S. liquefied natural gas (LNG) vessels that went to China in 2018 fell by around 20 percent from the prior year as the trade spat between the United States and China heated up. In recent weeks, however, that dispute has cooled somewhat with talks in China this week between Chinese and U.S. trade teams raising hopes additional tariffs can be avoided. As the trade spat escalated during the last six months of 2018, only six LNG vessels went from the United States to China, down from 25 during the same period in 2017. China imposed tariffs on U.S. LNG in September. That happened even though Chinese LNG purchases last year reached all-time highs and the United States sold record amounts of the fuel. China, the fastest growing consumer of the fuel, became the world's second-biggest LNG buyer in 2017 as the government weans the country off dirty coal to reduce pollution. The United States, meanwhile, is on track to become the world's third-biggest LNG exporter by capacity in 2019 as additional export terminals enter service. In total, 24 U.S. vessels went to China in 2018 — mostly during the first half of the year — versus 30 in 2017. Companies proposing new U.S. LNG export terminals expressed optimism a new U.S.-China trade agreement could help advance their projects. China imported about US$447 million of LNG from the United States in 2017.

CURRENCY NEWS: China yuan strengthened against greenback on Friday, as central bank set stronger mid-point rate, underpinned by broad weakness in the greenback in overseas markets. Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.7909 per dollar, 251 basis points firmer than previous day's fix

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