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Free AccessMNI China Daily Summary: Friday, May 22
BEIJING (MNI) - EXCLUSIVE: Trade conflict with the U.S. is likely to
increase yuan exchange rate volatility, but the People's Bank of China (PBOC)
will remain on guard against any build-up in expectations of one-way price moves
or of appreciation damaging to export competitiveness, a former senior official
from the State Administration of Foreign Exchange told MNI, calling for China to
diversify foreign reserves away from dollar assets.
TOP NEWS: China refrained from its usual practice of setting a formal
growth target this year, citing the "great uncertainties" caused by the Covid-19
pandemic on the global economy, according to the annual report to the National
People's Congress (NPC) presented by Premier Li Keqiang today. The government
stressed that growth is still necessary to support its goals including ensuring
employment and eradicating poverty, Premier Li said. The fiscal deficit will
rise to more than 3.6% this year, Li's report read, as China will keep fiscal
policies "even more proactive and effective," increasing the deficit by CNY1
trillion yuan from last year and selling CNY1 trillion in special treasury
bonds, the report noted. The target was set at 2.8% last year.
POLICY: China will allow special local government bonds issued to rise by
74.4% to CNY3.75 trillion this year in a major policy drive to boost
infrastructure investment and revive an already stalling economy stunted by the
Covid-19 pandemic. In addition to special bonds, China will further allocate
CNY600 billion to infrastructure investment. The proceedings will finance
infrastructure to beef up areas including public health, energy reserves and
waterworks, according to reports submitted to the NPC today.
LIQUIDITY: The PBOC skipped open market operations for the fifth day,
leaving liquidity unchanged, according to Wind Information. Liquidity in the
banking system is reasonable and ample, the PBOC said on its website.
RATES: The seven-day weighted average interbank repo rate for depository
institutions (DR007) rose to 1.5159% from Thursday's close 1.4214%, Wind
Information showed. The overnight repo average increased to 1.0937% from 1.0918%
on Thursday.
YUAN: The currency weakened to 7.1395 against the dollar from Thursday's
close of 7.0998. PBOC set the dollar-yuan central parity rate higher at 7.0939,
up from the 7.0868 set on Thursday.
BONDS: The yield on 10-year China Government Bonds was last at 2.5775%,
down from Thursday's close of 2.6600, according to Wind Information.
STOCKS: The Shanghai Composite Index lost 1.89% to 2,813.77. Hong Kong's
Hang Seng Index tumbled 5.56% to 22,930.14, after China submitted a security law
proposal for the city that has fanned fears of fresh protests.
FROM THE PRESS: Foreign capital in China remains stable and no large-scale
outflow has occurred despite the coronavirus epidemic, said Zhang Yesui, the
spokesman of the NPC. The pandemic won't reverse globalization despite
short-term impact on global supply chain, according to Zhang.
China should allow qualified private banks to issue perpetual bonds and
capital supplementary bonds, the Shanghai Securities News reported citing Guo
Xinming, president of the PBOC Nanjing Branch and an NPC delegate. Some banks
should be allowed to go public, adopt incentive mechanisms and employee stock
ownership plans, the newspaper cited Guo as saying.
--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
[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]
To read the full story
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.