MNI China Daily Summary: Monday, April 1

     DATA: The Caixin China manufacturing PMI gained 0.9 point to 50.8 in March,

after four months in contraction, the publisher said by email on Monday. New

orders, which indicates future activity levels, increased moderately for the

second month, signaling a greater level of factory activities, Caixin said. New

export orders rebounded slightly, reversing a contraction. The indicator has

strengthened in Q1, overcoming weakness in 2018, said Caixin.

     TRADE: China will continue to suspend any additional tariffs on U.S.

vehicles and auto parts for now, aiming to create a good atmosphere for the

ongoing trade talks between the two sides, according to a statement released on

Sunday on the website of the Ministry of Finance. The deadline for the delay

will be announced separately, the Ministry said.

     LIQUIDITY: The People's Bank of China (PBOC) skipped open market operations

for the ninth straight trading day, leaving liquidity unchanged as no reverse

repos matured, according to Wind Information. Total liquidity in the banking

system is at a relatively high level, enough to offset the issuance of

government bonds, the PBOC said.

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

institutions (DR007) decreased to 2.2000% from the close of 2.7337% on Friday,

Wind data showed. The overnight repo average fell to 2.1000% from 2.5102% on

Friday.

     YUAN: The yuan appreciated to 6.7107 against the U.S. dollar from the close

of 6.7202 on Friday. The PBOC set the dollar-yuan central parity rate at 6.7193

today, compared with 6.7335 on Friday.

     BONDS: The yield on the 10-year China Government Bond (CGB) was last at

3.1275%, up 5 bps from the close of Friday, according to Wind Information.

     STOCKS: The benchmark Shanghai Composite Index rose 2.58% to 3,170.36,

hitting a near one-year high, mainly fuelled by rallying fuel cell, defense,

nuclear power and non-ferrous metal shares. Hong Kong's Hang Seng Index

increased 1.76% to 29,562.02.

     FROM THE PRESS: The PBOC is likely to cut the reserve requirement ratio in

April after the Q1 data release, or at the end of Q2, said Ming Ming, chief

analyst at CITIC Securities in a report today. Policy rates may also be cut to

stem declining industrial profits and deflation, Ming said. Further easing

policies could drive yield on 10-year CGB to as low as 2.8%, Ming added.

     China's VAT tax cuts start today, benefiting industries such as coal, steel

and non-ferrous metals, the Securities Daily said. The cut will gradually reduce

the y/y PPI and CPI over next year, as the tax cuts will largely benefit

consumers through lower prices. Therefore, monetary policy need not respond to

downward PPI and CPI, the newspaper reported citing Fan Lei, a researcher at

Sealand Securities.

     The Federal Reserve's halt in rate hikes and shrinking balance sheet may

not be enough to prevent a significant correction of the overvalued U.S. stock

market, which may trigger a deep global financial crisis, Guan Tao, senior

researcher at the China Finance 40 Forum, a prominent think tank, said in a

report, noting the environment of long-term low or negative interest rate, low

returns on safe assets, high prices of risky assets and accelerated expansion of

shadow banking.

--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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