MNI China Daily Summary: Thursday, May 14

     EXCLUSIVE: China may propose extending the implementation period of its

Phase 1 trade agreement with the U.S. or cite force majeure to reduce promises

for purchases of American goods, but Beijing wants to keep the deal if possible

despite a report in a state-run newspaper that some officials were unhappy with

it, advisors and sources close to the government told MNI.

     Australia could find its barley exports to China effectively banned for up

to five years as Beijing considers imposing anti-dumping tariffs, with Canberra

caught in the crossfire between China and the U.S. tensions, sources close to

the Chinese government told MNI.

     POLICY: China will overcome any difficulties and push to fulfil the

Phase-One agreement with the U.S., a senior advisor to the Chinese government

told reporters on Thursday."The China-U.S. Phase One agreement was negotiated

with a huge amount of time and energy: it is of great importance and it benefits

both China and the U.S., as well as the world economy," said Ruan Zongze, vice

president of China Institute of International Studies (CIIS), and a former

diplomat to the U.S.

     China's foreign trade faces continued downward pressures, especially for

small and medium-sized companies and labor-intensive industries amid the

economic impact of the coronavirus, said Commerce Ministry Spokesman Gao Feng,

when asked at a briefing if the rebound of April export would continue. China's

April export growth was supported by the accelerated resumption of domestic

production capacity, as well as the relatively fast recovery of market demand in

Japan and South Korea and the generally stable ASEAN market, said Gao. Exports

to "Belt and Road" countries still have great potential despite shipping and

supply chain disruptions in the short-term, Gao added.

     China will increase its macro-policy efforts to overcome the impact of the

coronavirus, with a more proactive fiscal effort and flexible monetary policy,

wrote He Lifeng, director of the National Development and Reform Commission in

an article published on the NDRC website late Wednesday.

     China will fund a boost in investment through selling special central

government bonds and local government debt and raising the deficit to meet

fiscal demand, Minister of Finance Liu Kun wrote in a commentary published by

the People's Daily. This appeared to be the government's first open

acknowledgement how it will use the money raised by Special China Government

Bonds this year, MNI noted.

     LIQUIDITY: The People's Bank of China (PBOC) skipped open market operations

for the 12th day, net draining CNY200 bln as a same amount of Medium-term

Lending Facility (MLF) matured today, according to Wind Information. Liquidity

in the banking system is reasonable and ample, the PBOC said on its website.

     DATA: Foreign direct investment (FDI) into China totalled $10.14 billion in

April, a rise of 8.6% y/y, due to a batch of key foreign-invested projects

signed and landed, as well as a low base in the same period last year, the

Ministry of Commerce said. FDI into China for the first four months fell 8.4%

y/y to $41.34 billion. 

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

institutions (DR007) decreased to 1.1000% from Wednesday's close 1.2583%, Wind

Information showed. Overnight repo average rose to 0.7484% from 0.6832%

yesterday.

     YUAN: The yuan weakened to 7.0948 against the dollar from Wednesday's close

7.0937. PBOC set the dollar-yuan central parity rate higher at 7.0948, up from

the 7.0875 set on Tuesday.

     BONDS: The yield on 10-year China Government Bonds was last at 2.5300%, up

from Wednesday's close of 2.5291%, according to Wind Information.

     STOCKS: The Shanghai Composite Index lost 0.96% to 2,870.34. Hong Kong's

Hang Seng Index lost 1.45% to 23829.74.

     FROM THE PRESS: The Q1 rise in China's macro leverage ratio was a positive

sign of the resumption of the economy rather than a warning to cut back on

stimulus in a challenging period,  the Securities Times said in a commentary.

The macro leverage ratio rose by 13.9 percentage points in Q1, more than twice

the increase for all of 2019. The government has shifted its view on the ratio

as the economic situation changes and the goal has been shifted from

"stabilizing the leverage" at three years ago to the current "leveraging", the

Times added.

     China is preparing to punish U.S. congressmen, Missouri State and others

for "cooking up anti-China acts", according to Global Times citing unnamed

sources close to the Chinese government. Global Times said that, for some of

these people, being anti-China has become part of their daily routine. 

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

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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