MNI China Daily Summary: Tuesday, February 25

     PBOC: The People's Bank of China (PBOC) will support financial institutions

extending credit lines to industries and private and small companies affected by

the epidemic, increase loan renewals and appropriately reduce or exempt loan

interests for small firms, Governor Yi Gang said in a statement on the PBOC

website. Prudential monetary policy will be more flexible and the priority is

the recovery of the real economy, said Yi. 

     LIQUIDITY: The PBOC skipped open market operations for the sixth day,

leaving liquidity unchanged, according to Wind Information. Total liquidity in

the banking system is at a reasonable and ample level, PBOC said on its website.

     RATES: The seven-day weighted average interbank repo rate for depository

institutions (DR007) rose to 2.0704% from 1.9977% on Monday, Wind Information

showed. The overnight repo average increased to 1.5822% from 1.5162% on Monday.

     YUAN: The yuan strengthened to 7.0162 against the dollar from 7.0315 on

Monday. PBOC set the dollar-yuan central parity rate lower for the first time in

six trading days at 7.0232 compared with 7.0246 on Monday.

     BONDS: The yield on 10-year China Government Bonds was last at 2.8525%, up

from the close of 2.8425% on Monday, according to Wind Information.

     STOCKS: The Shanghai Composite Index lost 0.60% to 3,013.05. Hong Kong's

Hang Seng Index gained 0.27% to 26,893.23.

     FROM THE PRESS: China should not relax controls over the real estate market

even though the coronavirus epidemic has delayed house construction and sales,

the Economic Information Daily said in a front-page commentary. Aggregate demand

for houses have not been impacted by the epidemic, while even small relaxations

of controls may raise speculation, the daily said.

     The PBOC should be cautious in lowering benchmark deposit rates as cuts

would change prudential monetary policy, the Securities Times said in a

commentary. China's banks should optimize business models to keep themselves

profitable as loan rates have been guided down by the central bank, the

newspaper said. Banks have also cut their short-term profit projections and

stepped up supports to the real economy, with a focus on small and medium

enterprises, the newspaper added.

     Policy banks in China should make up for shortfalls in infrastructure

investment as the central government keeps limits on local government debt and

financial institutions, the China Securities Journal said in a commentary. The

government should also consider selling special government bonds, set up a

special reconstruction fund and another for small and medium enterprises, the

commentary said.

     The China National People's Congress has postponed this year's conference

due to the virus outbreak and no date has been decided, Xinhua News Agency said.

China usually convenes the annual session on March 5, which discloses government

targets including GDP growth. 

--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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