MNI China Daily Summary: Thursday, May 21

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

leaving liquidity unchanged, according to Wind Information. Liquidity in the

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

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

institutions (DR007) decreased to 1.2576% from Wednesday's close 1.4090%, Wind

Information showed. Overnight repo average fell to 1.0742% from 1.2085%

yesterday.

     YUAN: The yuan strengthened to 7.0998 against the dollar from Wednesday's

close 7.1067. PBOC set the dollar-yuan central parity rate lower at 7.0868, down

from the 7.0956 set on Wednesday.

     BONDS: The yield on 10-year China Government Bond was last at 2.3494%, down

from Wednesday's close of 2.5282%, according to Wind Information.

     STOCKS: The Shanghai Composite Index lost 0.55% to 2,867.92. Hong Kong's

Hang Seng Index edged down 0.49% to 24280.03%.

     FROM THE PRESS: The planned special China government bonds responding to

the virus outbreak should fund investment in specific income-generating

projects, the 21st Century Business Herald reported citing Feng Qiaobin, a

deputy director of macroeconomic research at the Development Research Centre of

the State Council. As these bonds don't count as deficit, they must correspond

to assets. An increase in the deficit-to-GDP ratio should be used to increase

payment transfers to local governments, subsidize consumption and stabilise

employment, Feng said according to the newspaper.

     The People's Bank of China could accelerate the pace of interest rate cuts

in June beginning with a 10 to 20 bps cut to the medium-term lending facility,

the Economic Information Daily reported citing Wang Qing, the chief analyst at

the credit-rating agency Dongfang Jincheng. Loan prime rate may be driven down

by up to 20 bps after any MLF rate cut and a cut to the 5-year LPR, which links

to mortgage rates, would be less than 10 bps as the government cracks down on

housing speculation, Wang said.

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

[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]