MNI China Daily Summary: Monday, February 24

     POLICY: The People's Bank of China (PBOC) will lower the reserve ratio

requirement for targeted banks further and adopt more tools to support small and

medium enterprises impacted by the coronavirus epidemic, Deputy Governor Chen

Yulu said on Monday. Commercial banks are being encouraged to sell more special

financial bonds to boost capital to increase lending to small firms, Chen said

at a press conference.

     POLICY:  China should issue around CNY1-1.5 trillion in special government

bonds as soon as possible to boost credit and help fight the fallout from

coronavirus, Zhang Bin, a senior fellow at China Finance 40 Forum, a prominent

government-sponsored think tank, told reporters. Beijing should also beware of a

possible sharp decline of credit, rising local government deficits and the

spread of the virus beyond its borders, Zhang noted in a separate quarterly

report for CF40.

     LIQUIDITY: The PBOC skipped open market operations for the fifth day,

draining CNY300 billion given the same amount of matured reverse repos,

according to Wind Information. Total liquidity in the banking system is at a

reasonable and ample level, PBOC said on its website.

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

institutions (DR007) fell to 1.9977% from Friday's close of 2.0780%, Wind

Information showed. The overnight repo average increased to 1.5162% from the

previous 1.3429%.

     YUAN: The currency strengthened to 7.0315 against the dollar from 7.0386 on

Friday. PBOC set the dollar-yuan central parity rate higher for the fifth day at

7.0246, compared with 7.0210 on Friday, the weakest fixing since Dec. 12, 2019.

     BONDS: Yield on 10-year China Government Bond was last at 2.8500%, down

from the close of 2.8725% on Friday, according to Wind Information. 

     STOCKS: The Shanghai Composite Index lost 0.28% to 3,031.23. Hang Seng

Index tumbled 1.79% to 26,820.88.

     FROM THE PRESS: China's fiscal policy needs to be even more proactive and

effective, and the prudential monetary policy should be more flexible, said

President Xi Jinping at a meeting on coronavirus control, Xinhua News Agency

reported late Sunday. The government will introduce temporary and targeted tax

and fee cuts while accelerate current regulatory fee cuts, subsidize interest

payments and expand local government bond issuances, Xinhua cited Xi as saying.

     The PBOC will continue to guide rates lower and reduce capital costs, Liu

Guoqiang, a vice governor of the central bank, said on its newspaper Financial

News. The central bank will lower the required reserve-deposit ratio for more

targeted commercial banks this year and release more liquidity, according to

Liu. Policy banks will step up support for manufacturers, import and export

businesses and pork producers, the newspaper cited Liu as saying.

     Zhumadian city in central China's Henan province lowered the minimum down

payment ratios for first home buyers to 20% from 30% under the housing provident

fund policy, The Beijing News reported. The municipal government will also

subsidize buyers under talent-recruitment programs and migrant workers with

CNY100 to 200 per square metre for first-time purchases, it said. The move

signals the start of the second phase of the bailout to stimulate home purchase

demand, the newspaper said citing Zhang Dawei, chief analyst at Centaline

Property. Previous measures targeted real estate developers and sought to ease

their funding pressure amid the coronavirus outbreak, the newspaper cited Zhang

as saying.

     Allowing some Chinese commercial banks and insurers to trade Government

Bond futures on the China Financial Futures Exchange will help to promote

interest rate reform and further open up the China's financial markets, the

Securities Times said in a commentary. New participants are required to have

sufficient risk management, internal controls and business processing systems

that prevent transaction risks, 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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