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TOP NEWS: The People's Bank of China (PBOC) lowered the 1-year medium-term
lending facility (MLF) rate to 3.15% from 3.25% on Monday, while injecting
CNY200 billion via 1-year MLF, according to a statement on its website. This
followed a 5 bps cut back on Nov. 5 last year.
POLICY: China's current account is likely to register a surplus as the
phase-one trade deal boosted trade and inflows foreign investment rose, Xuan
Changneng, the deputy administrator of State Administration of Foreign Exchange
(SAFE), said at a briefing on Saturday. China will keep a basic balance in
international payments despite the coronavirus epidemic, the impact of which is
short-term and limited, Xuan said.
LIQUIDITY: The PBOC also injected CNY100 billion via 7-day reverse repos
with the rate unchanged today, according to the statement on its website. With
CNY200 billion injection by 1-year MLF, PBOC drained net CNY700 billion given
the maturity of CNY1 trillion of reverse repos, according to Wind Information.
These operations aim to offset the maturity of reverse repos and maintain
reasonable and ample liquidity in the banking system, PBOC said.
RATES: The seven-day weighted average interbank repo rate for depository
institutions (DR007) rose to 2.1094% from Friday's close of 1.9826%, Wind
Information showed. The overnight repo average increased to 1.4177% from the
YUAN: The currency weakened to 6.9807 against the dollar from 6.9795 on
Friday. PBOC set the dollar-yuan central parity rate lower at 6.9795, compared
with 6.9843 on Friday.
BONDS: The yield on 10-year China Government Bond was last at 2.9150%, up
from the close of 2.8900% on Friday, according to Wind Information.
STOCKS: The Shanghai Composite Index rallied 2.28% to 2,983.62, following
the central bank's MLF rate cut, and more support measures by the government to
counter the economic impact of the coronavirus outbreak. Hang Seng Index rose
0.52% to 27,959.60.
FROM THE PRESS: China's fiscal operations are in a tight balance between
reduced revenue and the need for increased spending, according to an article by
the Minister of Finance Liu Kun run by Qiushi, a publication of the Central
Committee of the Communist Party of China. In the current environment, simply
expanding the scale of fiscal spending was not enough to support a proactive
fiscal policy, said Liu. The government must persist in optimizing spending
structures and improve the direction, accuracy, and effectiveness of policies
and funds to ensure sustainable fiscal and economic operations, Liu said.
China's monetary policy should focus more on growth due to the impact of
the coronavirus, according to a front-page commentary on the Economic
Information Daily. The central government should also consider increasing the
deficit-to-GDP ratio and quotas of special-purpose bonds for local governments,
the newspaper said.
China's National People's Congress is deliberating postponing this year's
conference due to the outbreak of coronavirus, according to Xinhua News Agency.
China usually convenes the annual congress session on March 5 disclosing
economic targets including GDP growth and the deficit-to-GDP ratio.
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