MNI China Daily Summary: Monday, February 10

     EXCLUSIVE: China's policymakers should bolster the coronavirus-hit economy

by scaling back deleveraging moves, risking higher government borrowing levels

and an increased deficit-to-GDP ratio, policy advisors told MNI. "The

authorities should look to strike a balance (between economic growth and risk

prevention)," said Zhao Quanhou, director of the Financial Research Center at

the Chinese Academy of Fiscal Sciences, although he felt the current 3% deficit

cap would be maintained.

     POLICY: China said on Monday that there is no reason for measures

"interfering with international trade" as it copes with the coronavirus

outbreak. Local and central governments are actively taking measures to help

businesses, and some companies meeting the right conditions are resuming

production, Gao Feng, a Ministry of Commerce spokesman, said in a WeChat forum

with reporters.

     DATA: Inflation in China soared to 5.4% y/y in January from 4.5% in

December, exceeding 4.9% expected by economists. At the highest level since

October 2011, January's inflation was driven by Chinese New Year holiday and the

coronavirus outbreak, as well as the low basis of comparison from the same

period last year as this year's holiday was a month earlier than in 2019, the

National Bureau of Statistics said. Producer prices index rebounded to 0.1% y/y

from -0.5% in December, turning positive for the first time in 14 months.

     LIQUIDITY: The People's Bank of China (PBOC) injected CNY700 billion via

7-day reverse repos and CNY200 billion via 14-day reverse repos with rates

unchanged. This offset the maturity of CNY900 billion today, according to Wind

Information. The operations aim to counter the maturity of reverse repos and

maintain reasonable and ample liquidity in the banking system, PBOC said in a

statement on its website.

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

institutions (DR007) increased to 2.1521% from Thursday's close of 2.1174%, Wind

Information showed. The overnight repo average fell to 1.5847% from the previous

1.6924%.

     YUAN: The currency strengthened to 6.9853 against the dollar from 6.9860 on

Friday. PBOC set the dollar-yuan central parity rate higher at 6.9863, compared

with last Friday's rate of 6.9768.

     BONDS: The yield on 10-year China Government Bond was last at 2.8150%, down

from the close of 2.8275% on Friday, according to Wind Information. 

     STOCKS: The Shanghai Composite Index gained 0.51% at 2,890.49. Hang Seng

Index lost 0.59% to 27,241.34.

     FROM THE PRESS: Financial regulators in China should tolerate an increase

in non-performing loans as service companies deal with the impact of the

coronavirus, according to a front-page commentary by the Economic Information

Daily. Regulators should adjust assessment indicators and encourage institutions

to funnel resources to companies participating in epidemic prevention or those

impacted by the epidemic, it said.

     Local authorities should resume or commence the construction of highway and

water carriage projects to help boost economic growth, the Ministry of

Transportation said in a statement. Most transportation projects should be

resumed before Feb. 20 except those in areas severely affected by the epidemic,

the ministry said.

     More than 80% of China's listed companies may resume operations this week

after the extended break caused by the coronavirus epidemic, the China

Securities Journal reported citing Liu Zhe, deputy head of the Wanb Institute.

Many companies still face supply-chain and transport disruptions, and also a

shortage of workers and a dearth of virus protection equipment such as masks,

the newspaper said citing Zhang Yu, chief macroeconomic analyst with Huachuang

Securities.

     All of China's major delivery companies, which support the country's

ecommerce, have started operating on Monday, with 40% of the industry's normal

capacity expected to return by Feb. 15, Jiemian News reported citing statements

from the companies. Delivery service in some regions will continue to face

challenges due to restrictions imposed against the New Coronavirus Pneumonia,

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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