MNI China Daily Summary: Tuesday, February 12

     TOP NEWS: China will boost consumption and diversify export markets to help

support domestic growth, officials at the Ministry of Commerce told reporters

Tuesday. Consumption may further slow this year as trade disputes and global

risks persist, while pressures on the consumer increase. However, the sector

remains a key driver for future growth and MOFCOM said a series of new policies

would help underpin demand.

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

operations, resulting in a net drain of CNY100 billion as that amount of reverse

repos are maturing, according to Wind Information. The PBOC said the total

liquidity of the banking system is currently at a relatively high level

considering factors including maturing reverse repos. 

     RATE: The 7-day weighted average interbank repo average rate for depository

institutions (DR007) fell to 2.4112% from the close of 2.5147% on Monday: Wind

Information. The overnight repo average fell to 1.9851% from 2.2425%.

     YUAN: The yuan weakened to 6.7810 against the U.S. dollar from the close of

6.7804 on Monday. The PBOC set the dollar-yuan central parity rate at 6.7765

today, compared to 6.7495 set yesterday. 

     STOCKS: The benchmark Shanghai Composite Index rose 0.68% to 2,671.89. Hong

Kong's Hang Seng Index rose 0.1% to 28,171.33.

     BONDS: The yield on the benchmark 10-year China Government Bond was last at

3.09%, down 3 bps from the close of 3.12% on Feb 11, according to brokers

     FROM THE PRESS: China's policy interest rates, such as those on medium-term

lending facilities (MLF), and open market operations (OMO), are further expected

to drop as part of broad loosening measures to stimulate growth, Ming Ming,

analyst at Citic Securities, wrote in a report published Tuesday. Lower rates

may be bullish for the bond market, though its impact on stocks remains unclear,

Ming wrote. The dovish outlook of the U.S. Federal Reserve allows more room for

China to reduce rates, while statements by central bank officials on

market-based rate reform, such as "converging deposit and loan rates and money

rates," signal lower-rate intentions, he said.

     China's economy is in a period of slowing growth that may last one to two

years, as market forces, policies and uncertainties last year pushed the real

economy and capital markets to a lull, the Securities Times said in a

commentary. The slowdown should only be temporary and in the next three to five

years or even longer period, China has potential to grow further, as long as

policymakers don't make fundamental errors, the newspaper said. China's

urbanization is far from completion, market-based reform will drive reallocation

of capital, further boosting production and consumption, it said. 

     China's State Council will support lending to private companies by letting

banks boost capital, according to a readout following Premier Li Keqiang's

weekly cabinet meeting on Monday. While mindful of "a credit flooding,"

regulators will allow banks to increase the issuances of perpetual debt, lower

their barriers for selling preferred shares and convertible debt, allow funds

and annuities to participate, and encourage overseas financial institutions to

participate.

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

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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