MNI China Daily Summary: Tuesday, December 24

     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.

--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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