MNI China Daily Summary: Wednesday, January 20

EXCLUSIVE: China's GDP may expand 11.4% in the first quarter from a year ago, the fastest pace in more than a decade, riding the tailwind from pro-growth measures introduced to counter the pandemic's impact and necessitating greater policy focus on preventing asset bubbles, a prominent advisor to the government told MNI.

EXCLUSIVE: China is better prepared for trade discussions with the U.S. after making crucial concessions in the recent pact with the EU and could show goodwill by exempting more American products from tariffs in the hope of reciprocity and dialogue, policy advisors told MNI.

POLICY: A stronger yuan will help China meet its long-term growth target despite weighing on exporters, senior advisors of the central government said today, noting that the corporate tax and fee burden would continue to be reduced, although taxes for individuals may need to rise.

POLICY: The People's Bank of China (PBOC) has published a draft document outlining Regulations on Non-bank Payment Institutions, looking for public comment as the central bank looks to boost supervision methods to prevent systemic financial risks. The regulations will define the scope of the payment market as well as the standards for determining market dominance, helping to strengthen anti-monopoly regulations in this area.

LPR: China's central bank maintained its key loan rate unchanged today for the ninth month in succession as it flags a "policy normalization" stance amid historically high levels of national debt. The Loan Prime Rate, the benchmark to set companies' cost of borrowing, remains at 3.85% for a one-year maturity and at 4.65% for the five-year maturity. The move was in line with expectations as the PBOC held its Medium-Term Lending Facility rate at 2.95% on Jan. 15. The LPR is linked to the one-year MLF, which is viewed as being closer to market rates.

LIQUIDITY: The PBOC injected CNY280 billion via 7-day reverse repos with the rate unchanged today. This resulted in a net injection of CNY278 billion given the maturity of CNY2 billion reverse repos today, according to Wind Information. The operation aims to offset the impact of the tax season and maintain the liquidity in the banking system at a reasonable and ample level, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 2.5528% from the close of 2.3383% on Tuesday, Wind Information showed. The overnight repo average fell to 2.4943% from the previous 2.5000%.

YUAN: The currency strengthened to 6.4676 against the dollar from 6.4872 on Tuesday. The PBOC set the dollar-yuan central parity rate slightly higher at 6.4836 today. This compares with the 6.4833 set on Tuesday.

YUAN: The Chinese yuan is very likely to return to the level of 6.5-6.8 against the greenback this year with the recovery of the U.S. economy, YiCai.com reported citing Liang Ming, director of the Institute of International Trade, a research unit under the Ministry of Commerce.

BONDS: The yield on the 10-year China Government Bond was last at 3.2050%, up from Tuesday's close of 3.2000%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.47% to 3,583.09, while the CSI300 index increased by 0.72% to 5,476.43. Hang Seng Index rallied 1.08% to 29,962.47.

FROM THE PRESS: China's top decisionmakers have indicated a preference for prudent monetary policies this year while still supporting the recovery, the Securities Daily said in a commentary. China is likely to continue implementing pandemic relief policy tools such as debt deferment and credit loans for micro and small businesses, the newspaper wrote. The PBOC is likely to provide liquidity in accordance with the size and needs of different financial institutions and avoid any excessive injections, the commentary said.

The Chinese economy may grow more than 10% in Q1 before slowing to 9%, 6% and 5.5% in the following quarters, the China Securities Journal reported citing Liu Qiao, the dean of the Guanghua School of Management at Peking University. Consumption could rebound to 10% this year should the epidemic come under control, the newspaper said citing Wang Yiming, a former deputy director of the Development Research Center of the State Council. Real estate investment may shrink under credit constraints, infrastructure investment may be limited to 5% growth by local government debts and a lack of profitable projects, although manufacturing investment could register 8%, Liu said.

China should open up the market for the disposal of surging non-performing loans as small businesses struggled during the pandemic, the Economic Information Daily reported citing Li Qian, a manager of Golden Credit Rating. Regulators should reduce requirements such as provisioning coverage ratios and give incentives to asset management companies to further accelerate the drive, the Daily reported citing Wen Bin, a researcher from China Minsheng Bank.