MNI China Daily Summary: Monday, February 17

     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

previous 1.2237%.

     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.

--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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