MNI China Daily Summary: Monday, March 4

     EXCLUSIVE: China's economy is likely to bottom out in the second quarter

and may even rebound in the second half of this year, Liu Shijin, a member of

the Monetary Policy Committee of the People's Bank of China(PBOC), told MNI in

an exclusive interview. Growth is likely to be kept above 6% in the next two

years, then slow to 5%-6% in the years beyond 2020, said Liu, also a member of

the Chinese People's Political Consultative Conference, which began its annual

session on Sunday in Beijing.

     POLICY: The differing political systems and development paths of the U.S.

and China do not necessarily lead to confrontation, which benefits neither,

Zhang Yesui, spokesman of the National People's Congress(NPC) at a presser in

Beijing today. "There is no use dealing with new globalization issues using the

old Cold War thinking," said Zhang, when asked how China would respond to

Washington's growing belief that Beijing should be considered a threat, despite

an apparent break-through in trade talks.

     NPC: Fiscal departments could help state-owned banks to replenish capitals

via capital injections as shareholders, said Shanghai Securities News today

citing Guo Xinming, head of the PBOC's Nanjing Branch and a member of the NPC.

This aims to increase banks' capital adequacy ratio, and encourage them to

expand lending to private and small companies, the newspaper said citing Guo.

     NPC: A smart transformation of the entire technology value chain must be a

top priority, including developing "Internet of Things" and 5G, The Paper said

citing Yang Yuanqing, member of the NPC and chairman of the Lenovo Group. The

"efficiency dividends" may become a new engine for China's growth, the newspaper

said.

     TRADE: China welcomes the U.S. Trade Representative's promise to suspend

raising tariffs levied on Chinese goods since September last year and keep the

tariffs at the current 10% level, said the Tariff Commission Office of the State

Council on its website Saturday.

     LIQUIDITY: The PBOC skipped open market operations, resulting in a net

drain of CNY40 billion due to the maturity of reverse repos, according to Wind

Information. The total liquidity in the banking system is high enough to offset

the maturity of reverse repos, said the PBOC.

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

institutions (DR007) decreased to 2.2600% from the close of 2.4058% on Friday,

Wind data showed. The overnight repo average fell to 1.9200% from 2.1344%

Friday.

     Yuan: The yuan appreciated to 6.6991 against the U.S. dollar from the close

of 6.7078 on Friday. The PBOC set the dollar-yuan central parity rate at 6.7049

today versus 6.6957 last Friday.

     STOCKS: The benchmark Shanghai Composite Index rose 1.12% to 3,027.58, back

to the 3,000 level since June 15 2018. Hong Kong's Hang Seng Index rose 0.51% to

28,959.59.

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

3.215%, up 2 bps from the close of Friday, according to Wind.

     FROM THE PRESS: China will always prioritize exchange rate reform despite

the fluctuation of the yuan, said China Business News citing Lu Lei, deputy

director of the State Administration of Foreign Exchange. The purpose of FX

market reform is not to stabilize the currency, but to promote the

liberalization of trade and investment and serve the economy, the paper said

citing Lu.

     The supply-side reform of the financial sector should focus on expanding

direct financing, as the current financing channel is dominated by bank loans,

said Securities Times citing Yang Weimin, deputy director of the Economic

Committee at the Chinese People's Political Consultative Conference(CPPCC). Yang

also suggested city commercial banks, rural commercial banks, large commercial

banks and joint-stock banks to differentiate and highlight their main

businesses, 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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