MNI China Daily Summary: Tuesday, February 19

     POLICY: China will continue to push bank recapitalization through the use

of perpetual bonds and other channels to help banks raise capital, China's

central bank and banking regulator told reporters on Tuesday. Perpetual bonds

help banks meet the increasing need for capital given their rapid growth and

stricter regulations curbing off-balance sheet assets, said Pan Gongsheng, a

deputy governor of the People's Bank of China (PBOC).

     TRADE: China's Vice Premier Liu He will lead a trade delegation to

Washington D.C. on Thursday and Friday for the seventh round of high-level talks

with U.S. Trade Representative Robert Lighthizer and U.S. Treasury Secretary

Steven Mnuchin, Xinhua News Agency reported today.

     DATA: China's capital outflow slowed in January from December as indicated

by FX purchase positions published today by the PBOC. The purchase positions

last month fell for the sixth month, down CNY1.21 billion to CNY21.25 trillion,

compared with CNY4.04 billion reduction in December, according to the PBOC. 

     LIQUIDITY: The PBOC skipped open market operations (OMOs) for the seventh

day, leaving liquidity unchanged, with no reverse repo maturing today, according

to Wind Information. The PBOC website said cash returning to the banking system

pushed up total liquidity.

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

institutions (DR007) increased to 2.3500% from Monday's close of 2.2597%,

according to Wind Information. The overnight repo average rose to 1.9500% from

1.8245% on Monday.

     Yuan: The yuan depreciated to 6.7675 against the U.S. dollar from Monday's

close of 6.7671. The PBOC set the dollar-yuan central parity rate at 6.7642

today, lower than the 6.7659 set on Monday.

     STOCKS: The benchmark Shanghai Composite Index rose 0.05% to 2,755.65. Hong

Kong's Hang Seng Index decreased 0.42% to 28,228.13.

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

3.1380%, up 2bps from the close of Monday, according to brokers.

     FROM THE PRESS: A rebound in the Chinese economy in Q3 may be stronger than

expected as pro-growth policies take effect, the Economic Information Daily said

in a front-page commentary. Performance in the 1H may also be better than

previous projections given the government's so-called countercyclical adjustment

policies and looser credit environment, the paper said.

     The further internationalization of the yuan will help China lower

financial risks, stabilize the exchange rate and ease capital outflow pressure,

according to a report by the PBOC published by China Business News. Control over

capital flows should still be maintained even with the currency's reform,

according to the report. 

     China unveiled a plan for closer integration of the Guangdong-Hong

Kong-Macau Greater Bay Area, urging the region to seek innovation-based growth,

boost advanced manufacturing, emerging industries and modern services, and be

internationally recognized and competitive by 2035, according to a statement on

the State Council's website on Monday. 

--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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