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TOP NEWS: China is considering cutting the deposit reserve ratio to lower
real interest rates and financing costs for companies, Xinhua News Agency
reported citing Premier Li Keqiang. China will step up support for small and
medium banks which directly service small and medium enterprises(SME), in the
hope that the banks will increase lending to SMEs, Xinhua cited Li as saying.
POLICY: China will further strengthen its real economy in its next stage of
development, including building advanced manufacturing, Vice Minister of Finance
Xu Hongcai said in Beijing on Tuesday.
LIQUIDITY: The People's Bank of China (PBOC) skipped open market
operations, leaving liquidity unchanged as no reverse repos mature today. Total
liquidity in the banking system is relatively high due to an increase in fiscal
expenditures near the end of the year, the PBOC said.
RATES: The seven-day weighted average interbank repo rate for depository
institutions (DR007) fell to 1.5515% from 1.9223% on Monday, Wind Information
showed. The overnight repo average increased to 1.0965% from 1.5265% on Monday.
YUAN: The yuan strengthened to 7.0075 against the dollar from 7.0127 on
Monday. PBOC set the dollar-yuan central parity rate higher at 7.0119, compared
with Monday's 7.0117.
BONDS: The yield on 10-year China Government Bonds was last at 3.1725%, up
from the close of 3.1700% on Monday, according to Wind Information.
STOCKS: The Shanghai Composite Index gained 0.67% to 2,982.68, as
non-ferrous metal, media, and semiconductors shares advanced. Hong Kong's Hang
Seng Index lost 0.15% to 27,864.21.
FROM THE PRESS: China needs to improve its bond default mechanisms and
promote market clearing, the China Securities Journal reported citing Liu
Guoqiang, a deputy governor of the PBOC. China should optimize its financing
structures and increase the proportion of direct financing, including bonds, the
newspaper cited Liu as saying.
Sixty-eight Chinese companies defaulted on 176 bonds in 2019 totalling
record CNY101 billion, the 21st Century Business Herald reported citing Zhang
Xu, an analyst with Everbright Securities. Since the central bank seized
Baoshang Bank this summer, the market has been concerned by bonds issued by
financing platforms operated by local governments. The issuance of 369 bonds has
been postponed this year, the newspaper said.
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