MNI China Daily Summary: Friday, April 19

     TOP NEWS: China's proactive fiscal policy should be more positive and the

prudential monetary policy should be neither too loose nor too tight, according

to the politburo meeting of the Central Committee of the Communist Party of

China held today, Xinhua News Agency reported. Macro-economic policies should

focus on promoting high-quality development and stimulate market vitality,

Xinhua said. Local governments should continue to crack down on housing

speculations with policies specific for different cities, Xinhua said. 

     EXCLUSIVE: The People's Bank of China is likely to slow its pace of easing,

pushing back any further cuts in banks' reserve requirement ratios, thanks to

better-than-expected first quarter growth data and as fiscal stimulus supports

the economy in the second quarter, government advisors told MNI. While advisors

questioned whether the first quarter's GDP growth rate of 6.4% was sustainable,

they said it should postpone further PBOC action for now, particularly as fiscal

policy moves begin to be felt. "Cuts in taxes and fees will take effect in Q2,

so the quantitative stimulus should be eased, " said Zhang Ping, deputy director

at the National Institute of Finance and Development, a state-level think tank,

and a research fellow at the Institute of Economics of the Chinese Academy of

Social Sciences.

     LIQUIDITY: The PBOC injected CNY20 billion via 7-day reverse repos, adding

liquidity for the fourth day. This net injected CNY20 billion as no reverse

repos mature today, according to Wind Information. The PBOC has net injected a

total of CNY300 billion reverse repo this week, Wind Information said.

     RATES: The 7-day weighted average interbank repo rate for depository

institutions (DR007) fell to 2.5000% from Thursday's close of 2.7637%, Wind

Information showed. The overnight repo average decreased to 2.4600% from

Thursday's 2.8159%. 

     YUAN: The yuan strengthen to 6.7034 from Thursday's close of 6.7040. The

PBOC set the dollar-yuan central parity rate at 6.7043 today, compared with

6.6911 set on Thursday.

     BONDS: The yield on 10-year China Government Bond was last at 3.3700%, up

from Thursday's close of 3.3500%, according to brokers.

     STOCKS: The benchmark Shanghai Composite Index rose 0.63% to 3,270.80. Hong

Kong's Hang Seng Index decreased 0.54% to 29,963.26.

     FROM THE PRESS: The yuan is expected to be strong supported by the prospect

of China reaching a trade agreement with the U.S. and the volatility of the

dollar index due to risky events such as the Brexit, the Securities Daily

reported citing Wang Qing, the chief analyst at credit rating agency Dongfang

Jincheng. That the PBOC has refrained from cutting required reserve ratios and

boosting liquidity may be out of the intention to keep the yuan exchange rate

stable, the newspaper reported citing Cao Xiao, the director of quantitative

finance center at Shanghai University of Finance and Economics. The yuan has

been supported by a larger trade deficit incurred by the U.S. and China's

better-than-expected Q1 indicators, Cao was cited as saying.

     A rebound in China's infrastructure investment may not be sustained through

the second half after further rebound in Q2 given limited space for further

fiscal stimulus, said Securities Daily citing Zhong Zhengsheng, chief economist

at CEBM, a research firm owned by Caixin. Real estate investment growth is

likely to be maintained given low inventory and robust home sales, the Daily

said citing Zhong.

     Chinese foreign trade is expected to withstand the global downward

pressure, based on the stable 3.7% y/y growth in combined imports and exports in

the first quarter, said Economic Information Daily today. The government should

continue to diversify trade partners, support cross-border e-commerce, and

engage private enterprises to counter the global trade slowdown, the Daily said.

--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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