MNI China Daily Summary: Friday, March 15

     TOP NEWS: China has passed a new foreign investment law on the conclusion

of the National People's Congress today, aiming to level the playing field for

overseas investors. The new law is expected to lead to the creation of a new

complaints filing regime and an information disclosure mechanism to ensure

greater transparency. It will come into effect on 1 January 2020.

     POLICY: China moderately lowered its growth target by using a range, 6 to

6.5%. It is sending the market a stable signal that the government will not let

the economy slip out of a reasonable range, Premier Li told reporters today. Li

also said that China will cut value-added tax (VAT) for manufacturing,

transport, construction and other sectors on April 1, and also start cutting

social security fees from May 1, adding that cuts in taxes and fees remained a

key measure to cope with the downward pressure.

     POLICY: The People's Bank of China should consider raising the deposit

reserve rate to help banks lower lending costs to companies, Dai Xianglong, the

former central bank governor said. "The interest rate the PBOC pays for the

deposit reserves that banks are required to set aside has been set at 1.62% for

a long term, and the authorities should raise it to a level not lower than the

average deposit rate," Dai told in a forum held by China Finance 40 Forum, a

prominent Chinese think tank.

     TRADE: Senior Chinese and US trade officials have made substantial progress

on negotiations between the two countries, according to Xinhua. The agency

reported that China's Vice Premier and top trade negotiator Liu He had

telephoned U.S. Trade Representative Robert Lighthizer and the U.S. Secretary of

the Treasury Steven Mnuchin on Friday for the third time. The report said

progress had been made on "crucial issues on the text" of a deal.

     LIQUIDITY: The PBOC injected CNY20 billion through open market operations.

With no reverse repos maturing this week, the net injection was the full CNY20

billion, according to Wind Information.

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

institutions (DR007) rose to 2.7600% from Thursday's close of 2.5817%, Wind

Information showed. The overnight repo average increased to 2.7300% from

Thursday's 2.3202%. 

     YUAN: The yuan appreciated against the dollar to 6.7117 from Thursday's

close of 6.7170. The PBOC set the dollar-yuan central parity rate at 6.7167

today, compared with 6.7009 set on Thursday.

     BONDS: The yield on 10-year China Government Bond was last at 3.155%, down

1.5 bps from the close of Thursday, according to brokers.

     STOCKS: The benchmark Shanghai Composite Index rose 1.04% to 3,021.75, back

to the 3000 level. The index has gained 1.75% this week. Hong Kong's Hang Seng

Index increased 0.56% to 29,012.26.

     FROM THE PRESS: China may soon establish an independent deposit insurance

organization, the China Daily reported today. The newspaper cited unidentified

policy advisers, who said the move was aimed at helping bankrupt banks exit the

market, limiting losses for depositors. The newspaper said the functions of the

agency, envisaged as a separate entity, were still to be decided.

     The Chinese stock market still has the potential to grow 10% to 15%,

according to a leading analyst at Morgan Stanley. Shanghai Securities News cited

Wang Ying, the China Market Strategist at Morgan Stanley, who said she was

optimistic about the A-share market and continued to raise the target price for

leading stocks, along with expectations of improved corporate profits.

--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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