MNI China Daily Summary: Monday, April 20

     EXCLUSIVE: China's exports are likely to weaken further in the second

quarter as the coronavirus pandemic saps international demand, although the yuan

may strengthen as the world's second-largest economy makes a quicker recovery

than elsewhere, government advisors told MNI in interviews.

     TOP NEWS: China's central bank cut its one-year Loan Prime Rate (LPR) by 20

bps to 3.85% on Monday, while also lowering the five-year LPR by 10 bps to

4.65%. Both were the biggest reductions since the LPR mechanism reform began

last August.

     POLICY: China will issue a further CNY1 trillion local government

special-purpose bonds (LGSB) by the end of May, boosting the 2020 front-loaded

quota for LGSBs to a record CNY2.29 trillion, while also raise deficits and

boost transfer payments after fiscal revenue in the first three months plunged.

Fiscal revenue fell 14.7% y/y in Jan-March, compared with growth of 6.2% y/y in

the same period last year, according to data released by the Ministry of Finance

today. 

     POLICY: China will act swiftly to introduce a broad selection of vigorous

and targeted policies to help firms survive and the economy stabilize, Yan

Pengcheng, head of the national economy at the National Development and Reform,

said today. The 6.8% y/y decline in China's Q1 GDP was not a normal reflection

of economic fundamentals, but a result of the coronavirus pandemic -- the worst

global crisis since World War II, Yan added.

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

for the third 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) decreased to 1.4192% from Friday's close of 1.4616%, Wind

Information showed. The overnight repo average increased to 0.8891% from the

previous 0.7125%.

     YUAN: The currency strengthened to 7.0755 against the dollar from 7.0764 on

Friday. PBOC set the dollar-yuan central parity rate higher at 7.0657, compared

with 7.0718 set last Friday.

     BONDS: The yield on 10-year China Government Bond was last at 2.5800%, up

from the close of 2.5575% on Friday, according to Wind Information. 

     STOCKS: The Shanghai Composite Index edged up 0.50% to 2,852.55. Hang Seng

Index lost 0.21% to 24,330.02.

     FROM THE PRESS: The first use of the expression "interest rate cut" in last

Friday's announcement from the Politburo meeting of the CPC Central Committee

shows there is more room for accommodative monetary policy, according to a

report in the China Securities Journal. The window for lowering the benchmark

interest rate for deposits may be opened, the newspaper said citing Xie

Yunliang, chief analyst of Minsheng Securities. There may be two more cuts to

the medium-term lending facility rate by 15 bps in total, the newspaper said

citing Zhu Jianfang, chief economist at CITIC Securities.

     China's infrastructure investment may surge to CNY26 trillion from CNY17

trillion in 2019, the Securities Times reported citing Zhao Yayun, a researcher

with the CITIC Foundation for Reform and Development Studies. Boosting

infrastructure investment drives the urbanisation and restructure of the

economy, the newspaper said citing Li Zhen, chief economist with Zhongshan

Securities. Li predicted this year's investment would focus on renovating ageing

residential compounds in cities, and on infrastructure projects for

environmental protection, the newspaper said.

--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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