MNI China Daily Summary: Friday, September 27

     EXCLUSIVE: China may move up sales of 2020 infrastructure-intended

special-purpose local government bonds to the fourth quarter to stabilize

investment, government advisors told MNI, though there is concern the move won't

deliver the expected boost to economic growth. "The issuance could be moved up

to Q4, given that the growing downward pressure could threaten the annual growth

target," said Zhang Bin, head of global macroeconomic research at Institute of

World Economics and Politics at the Chinese Academy of Social Sciences (CASS).

     POLICY: There is still significant room for China to boost investment in

industry and urban development, which could help it grow at more than 5% a year

for the next decade, but the country must deal with the middle-income trap, a

former head of research at China's finance ministry told MNI in an interview,

calling for current economic stimulus plans to focus on the private sector.

Chinese GDP growth should be above 5% or approaching 6% for the ten years after

2020, despite the prospect of a protracted trade dispute with the U.S., so long

as productive investment remains at sufficiently high levels, said Jia Kang, now

head of the China Academy of New Supply-side Economics, on the sidelines of the

2019 Moganshan Forum.

     LIQUIDITY: The People's Bank of China (PBOC) injected CNY30 billion via

14-day reverse repos, net-draining CNY10 billion after the maturity of CNY40

billion reverse repo, according to Wind Information. CNY100 billion of treasury

cash deposits held at commercial banks are also due to mature today, according

to Wind Information.

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

institutions (DR007) decreased to 2.3840% from Thursday's close of 2.4596%, Wind

Information showed. The overnight repo average fell to 1.2972% from Thursday's

1.6128%. 

     YUAN: The yuan strengthened to 7.1195 against the dollar from Thursday's

close of 7.1315. The PBOC set the dollar-yuan central parity rate weaker at

7.0731, compared with 7.0729 on Thursday.

     BONDS: The yield on 10-year China Government Bonds was last at 3.1450%, up

from the close of 3.1314% on Thursday, according to Wind Information. 

     STOCKS: The Shanghai Composite Index increased 0.11% to 2,932.17. Hong

Kong's Hang Seng Index edged down 0.33% to 25,954.81. 

     FROM THE PRESS: China's decision on further cutting interest rates should

be based on closer observation of the economy, Sheng Songcheng, a former

director of the statistics department at the PBOC, said in a front-page

commentary of the Economic Information Daily. While monetary easing has had a

significant impact on curbing the short-term decline in the economy, it could

also drive higher inflation and asset prices and hinder the restructuring of

China's economy in the long run, Sheng said.

     The PBOC may use targeted reserve requirement ratio (RRR) cuts, the

medium-term lending facility (MLF), refinancing and rediscounting to boost

lending to private and small companies, the PBOC-run newspaper Financial News

reported citing unnamed sources. The PBOC may also lower MLF rates and increase

central bank bill swaps (CBS) to ease the liquidity, capital and price

constraints faced by medium and small banks, the newspaper said.

     Chinese banks are required to keep their loan loss provisions at around

150% and those doubling this requirement rate may be hiding profits, the

Shanghai Securities News reported citing the Ministry of Finance. Funds in

excess to these provisions should be distributed to shareholders in China, the

newspaper said cited the ministry.

--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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