MNI China Daily Summary: Friday, March 13

     BEIJING (MNI) - EXCLUSIVE: The People's Bank of China (PBOC) could further

guide down the benchmark loan prime rate on March 20, via cuts to its

medium-term lending facility or money market policy rates soon, a prominent

policy advisor told MNI, with another saying that the PBOC had some space for

additional easing as Fed cuts support the yuan even as the Chinese trade balance

falls into deficit.

     TOP NEWS: The PBOC cut selected banks' reserve requirement ratios Friday,

releasing CNY550 billion into the system to shore up the virus-hit economy. The

central bank lowered RRRs by 0.5 to 1 percentage point, the second move this

year, allowing banks to meet their annual assessment criteria for enforcing

inclusive finance policy, expected to release CNY400 billion, according to a

statement on its website. Qualified joint-stock commercial banks will receive

another 1 pp cut, releasing another CNY150 billion, according to the statement.

All cuts will take effect on March 16, PBOC said.

     POLICY: China will allow small and medium-size enterprises (SMEs) to obtain

bank financing by using receivables, warehouse receipts and inventories as

collaterals, Yang Liping, the chief inspector at the China Banking and Insurance

Regulatory Commission at a briefing, as Beijing attempts to restore the

virus-hit production chain and prevent large-scale bankruptcies.

     LIQUIDITY: The PBOC skipped open market operations for the 19th day,

leaving liquidity unchanged, according to Wind Information. Liquidity in the

banking system is reasonable and ample, PBOC said on its website.

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

institutions (DR007) dropped to 2.0644% from Thursday's close 2.1598%, Wind

Information showed. The overnight repo average fell to 1.4064% from 1.6594% on

Thursday.

     YUAN: The currency weakened to 6.9926 against the dollar from Thursday's

close of 6.9840. PBOC set the dollar-yuan central parity rate higher for the

fourth trading day at 7.0033 on Friday compared with Thursday's 6.9641.

     BONDS: The yield on 10-year China Government Bonds was last at 2.6700%, up

from Thursday's close of 2.6150, according to Wind Information.

     STOCKS: The Shanghai Composite Index tumbled 1.23% to 2,887.43, following

the global selloff on increasing fear the coronavirus pandemic may lead to a

deep recession. Hong Kong's Hang Seng Index slipped 1.14% to 24,032.91.

     FROM THE PRESS: The coronavirus pandemic could be over in China by June, if

countries affected by the virus can take positive state intervention measures,

the China Central Television reported citing Zhong Nanshan, the

government-appointed expert adviser on the coronavirus outbreak. Zhong urged

stronger monitoring of people travelling to China from overseas, as he said some

countries abroad have not paid enough attention to the pandemic, CCTV reported.

     The peak of the current coronavirus outbreak in China has passed and the

epidemic has stabilized with the number of new cases continuing to decline, the

online edition of the People's Daily reported citing Mi Feng, a spokesman for

the National Health Commission.

     The PBOC's 19-day streak of not conducting OMOs has created room for

monetary easing, the China Securities Journal reported citing Zhang Xu, an

analyst with Everbright Securities. The PBOC should implement structural

monetary policies such as cutting the required-reserve ratios for targeted

institutions, and these policies can provide credits and liquidity to sectors

without a significant increase in the aggregate liquidity, the newspaper cited

Zhang as saying.

     China's auto sales and production may increase in March and fully recover

by Q3 should the coronavirus epidemic abates, the Economic Daily reported citing

Xu Haidong, deputy secretary-general of the China Association of Automobile

Manufacturers (CAAM). The GAAM has advised the government to support the

industry through measures such as continuing subsidies for electric vehicles and

stimulating vehicle demand, the newspaper said. Auto production in China fell

79.8% y/y while sales were down 79.1% y/y in February, the daily said citing

data by CAAM.

--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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