MNI China Daily Summary: Monday, March 25

     TOP NEWS: China and Hong Kong stocks fell on Monday, dampened by growing

fears over a U.S. recession. The benchmark Shanghai Composite Index fell 1.97%

to 3,043.03. Financial stocks led the drop, with major insurance shares

declining by more than 5%, and this was followed by retreats of media and liquor

shares, Wind Information said. Hong Kong's Hang Seng Index dropped 2.03% to

28,523.35, the lowest level in two weeks.

     LIQUIDITY: The PBOC skipped open market operations for the fourth trading

day, resulting in a net drain of CNY60 billion as the same amount of reverse

repos matured, according to Wind Information. Total liquidity in the banking

system is at a reasonable and ample level, according to the central bank.

     RATE: The 7-day weighted average interbank repo rate for depository

institutions (DR007) decreased to 2.5300% from the close of 2.6581% on Friday,

Wind data showed. The overnight repo average fell to 2.4000% from 2.6171% on

Friday.

     YUAN: The yuan depreciated to 6.7112 against the U.S. dollar from the close

of 6.7060 on Friday. The PBOC set the dollar-yuan central parity rate at 6.7098

today, compared with 6.6944 set last Friday.

     BONDS: The yield on the benchmark 10-year China Government Bond was last at

3.125%, down 1.5 bps from the close of Friday, according to Wind.

     FROM THE PRESS: China's yuan exchange rate will remain stable and balanced

because domestic economic fundamentals are good and the U.S. dollar has limited

room for appreciation, China Business News reported Monday. The newspaper cites

Pan Gongsheng, the Deputy Governor of the PBOC, as saying that important

progress in Sino-U.S. trade talks will also contribute to exchange rate

stability. Pan also said that China's macro leverage ratio is basically stable,

fiscal and financial risks are generally controllable, the international balance

of payments remains balanced, and FX reserves are sufficient. All of these

factors support a stable yuan, Pan said.

     PBOC Governor Yi Gang has outlined the Bank's key tasks for this year,

citing the accurate pricing of financial products and the provision of hedging

tools for investors to manage risks as priorities. Yi's comments were reported

by the China Business News, and the PBOC Governor went on to say that because of

China's high deposit rate it was important to convert the savings pool into

financial products provided by banks, brokers and insurers.

     China will continue scaling up infrastructure investment, support new

energy vehicles and tap into the potential of consumption in rural communities

as it looks to support economic growth, according to the Minister of Finance Liu

Kun. The Minister's comments were cited in the National Business Daily, which

also reported Liu as urging the accelerated issuance of local government bonds,

with the aim of using up the annual quota of CNY3.08 trillion of LGBs by

end-September.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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