MNI China Daily Summary: Friday, March 8

     POLICY: China should not rush to cut its benchmark interest rates, as any

move by the central bank will have a major impact and there is time to take

stock of the economy's overall standing, the president of a local branch of the

People's Bank of China told MNI in an exclusive interview. China's Prime

Minister Li Keqiang said out this week that both quantitative and pricing tools

could be used to lower real rates, but that didn't necessarily mean the central

bank would "cut rates in short-term," said Guo Xinming, president of the PBOC

Nanjing branch.

     POLICY: Wang Yi, China's Minister of Foreign Affairs, told reporters Friday

the U.S. intended to suppress China including by having Canada detain the CFO of

Huawei Technologies Co. It is an "intentional political suppression" against

specific Chinese companies and individuals, rather than a simple judicial case,

Wang commented. Wang also believes China and the U.S. won't and shouldn't go to

confrontation, as the interests of the two countries are intertwined.

     DATA: China's exports dropped 20.7% y/y in February, worse than -6.5% seen

in the MNI survey forecast. It was the sharpest monthly fall in three years.

Authorities blamed the poor performance on the Chinese New Year holiday, which

shuttered factories and suspended shipments. Exports would have risen 1.5%

discounting the Chinese New Year effect, customs said.

     DATA: Imports fell 5.2% y/y in February, following last month's 1.5% y/y

drop, better than -2.0% projected by the MNI survey. Imports would have gained

6.5% less the holiday impact, the customs said.

     LIQUIDITY: The PBOC skipped open market operations for the seventh trading

day, which left liquidity unchanged as no reverse repos mature, according to

Wind Information. Total liquidity in the banking system is at a reasonable and

ample level, said the PBOC. The PBOC has net drained CNY260 billion by reverse

repo and CNY104.5 billion by Medium-term Lending Facility for the last seven

trading day, Wind Information said.

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

institutions (DR007) fell to 2.1000% from Thursday's close of 2.3960%, Wind

Information showed. The overnight repo average decreased to 2.0400% from

Thursday's 2.0583%. 

     YUAN: The yuan depreciated against the dollar to 6.7269 from Thursday's

close of 6.7074. The PBOC set the dollar-yuan central parity rate weaker at

6.7235, compared with 6.7110 set on Thursday.

     BONDS: The yield on 10-year China Government Bond was last at 3.165%, down

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

     STOCKS: The benchmark Shanghai Composite Index fell 4.40% to 2,969.86,

falling below the 3000 level and marking the largest drop in about five months,

Wind Information said. Hong Kong's Hang Seng Index dropped 1.91% to 28,228.42.

     FROM THE PRESS: The National People's Congress, China's senior legislative

body will accelerate the start of drafting property tax laws this year, said

China Youth Daily today citing Li Zhanshu, the chairman of the Standing

Committee of the NPC during the second session of the 13th NPC today.

     The People's Bank of China (PBOC) should continue with the structural

deleveraging, mainly in SOEs, and controlling the macro leverage ratio,

Financial News said citing Wang Jingwu, director of the Financial Stability

Bureau of the PBOC. A large inventory of hidden local government debt, rising

risks of bond defaults and the real estate sector are three areas that may fan

instability in the financial industry, Wang was cited as saying.

     First-tier cities in China have moved to lower their additional VAT rate on

housing transactions by 50%, The Beijing News reported on Friday. This policy

may have little impact on the market overall, as it only reduces some smaller

taxes, not those major ones including VAT, deed tax and individual income tax in

the property market, the newspaper said citing Zhang Dawei, chief analyst at

Centraline Property Agency.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

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