MNI China Daily Summary: Thursday, March 14

     TOP NEWS: The People's Bank of China (PBOC) must focus on resolving the

"grey rhino" risks - namely threats that are highly probable but neglected - in

key areas, preventing abnormal fluctuations in the financial market, and avoid

systemic financial risks, the central bank said on its website today. The PBOC

also said that the supply-side structural reform of the financial sector must

focus on unblocking the transmission mechanism of monetary policy and promoting

better financial services for private and small firms.

     NPC: Property taxes should be levied on those who own more than one home

and use them for speculation, the 21st Century Business Herald reported citing

Yin Zhongqing, deputy director of the National People's Congress Financial and

Economic Affairs Committee. Yin also suggested to set the tax-free area of

residential housing a bit looser, and that local governments be given autonomy

to decide when to levy and at what rate, the newspaper said.

     DATA: Fixed-asset investment (FAI) grew 6.1% y/y in the first two months of

2019, beating the 5.9% median in an MNI survey, mainly driven by strong property

investment growth which rose to 11.6% from 2018's 9.5%. Industrial output grew

5.3% y/y in the Jan-Feb period, just shy of the 5.5% forecast by analysts polled

by MNI. The YTD data was the lowest since Jan-Feb 2009. Retail sales growth was

8.2% y/y, in line with the 8.2% forecast in an MNI survey. It continued to

linger around the low level in end-2018, flat from December's 8.2%.

     DATA: China's capital outflow slightly eased in February from January as

indicated by FX purchase positions published on Thursday by the PBOC. The

purchase positions last month fell for the seventh month by CNY330 million to

CNY21.3 trillion, compared with the CNY1.214 billion contraction in Jan.

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

day on Thursday with no reverse repos maturing, according to Wind Information.

Impacted by the tax season, the total liquidity in the banking system has

declined but is still at a reasonable and ample level, said the PBOC.

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

institutions (DR007) increased to 2.5800% from Wednesday's close of 2.4326%,

according to Wind Information. The overnight repo average rose to 2.3100% from

Wednesday's 2.0772%.

     YUAN: The yuan depreciated to 6.7170 against the U.S. dollar from

Wednesday's close of 6.7092. The PBOC set the dollar-yuan central parity rate at

6.7009 today, compared with 6.7114 set on Wednesday.

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

3.1700%, up 0.5 bps from the close of Wednesday, according to brokers.

     STOCKS: The benchmark Shanghai Composite Index fell 1.20% to 2,990.69. Hong

Kong's Hang Seng Index increased 0.15% to 28,851.39.

     FROM THE PRESS: China's shadow banking activities have decreased steadily,

which will ultimately be good for the real economy, Xinhua News Agency said in a

commentary. Data published by the PBOC showed that off-balance sheet financing

decreased by CNY21.7 billion in the first two months, compared with CNY209.2

billion in average monthly reduction in Q4, Xinhua said.

     The PBOC may need to resume OMOs to inject liquidity after skipping them

for 11 days, the China Securities Journal said citing unidentified market

participants. Money supply has grown tighter due to increased tax payments,

accelerated issuances of local government bonds, and the maturity of medium-term

lending facilities(MLF), the newspaper said citing the unidentified people.

--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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