MNI China Daily Summary: Tuesday, February 26

     POLICY: China's source of financing is dominated by loans provided through

larger banks, while the poorly developed equity market can't support businesses

with sufficient direct financing, Pan Gongsheng, vice governor of the People's

Bank of China, said on China Central Television. Pan called for more supply-side

structural reform of the industry. 

     POLICY: Investment in manufacturing and housing may remain "relatively fast

growth." Total fixed-asset investment is expected to be stable, investment in

high-end manufacturing and modern services are the main driver, according to the

National Development and Reform Commission's investment outlook report published

today.

     LIQUIDITY: The PBOC injected CNY120 billion via 7-day reverse repos,

resulting in a net injection of CNY120 billion as no reverse repos mature,

according to Wind Information. Today's injection aims to offset tax collection

impact delayed by the Chinese New Year, the PBOC said.

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

institutions (DR007) increased to 2.7300% from Monday's close of 2.6675%,

according to Wind Information. The overnight repo average rose to 2.7300% from

2.6165% on Monday.

     Yuan: The yuan depreciated to 6.6961 against the U.S. dollar from Monday's

close of 6.6941. The PBOC set the dollar-yuan central parity rate at 6.6952

today, lower than the 6.7131 set on Monday.

     STOCKS: The benchmark Shanghai Composite Index fell 0.67% to 2,941.52. Hong

Kong's Hang Seng Index decreased 0.65% to 28,772.06.

     BONDS: The yield on 10-year China Government Bond was last at 3.2120%, up

3.2 bps from the close of Monday, according to brokers.

     FROM THE PRESS: Under China's new tax regulations, the actual burden of

small and micro-sized enterprises will be reduced to 5% from the previous 10%,

said China News Service today citing Liu Baozhu, deputy director of the Income

Tax Department of the State Administration of Taxation(SAT).

     Recent adjustments in the U.S. dollar index and policies of the PBOC may

boost the yuan against the dollar in the short term, said China Securities

Journal. However, the yuan does not have the conditions for appreciation over

the long term, the newspaper said.

     China's monetary and fiscal policies require further countercyclical

adjustment given a slowing economy, Ming Ming, a researcher at Citic Securities,

wrote in a report. Ming cited high debt ratios of private SMEs as a factor in

low risk appetite of banks, urging more monetary policy, including targeted

interest rate cuts.

     Chinese provinces vowed to implement tax and fee cuts for small businesses,

including those on natural resources and commercial property, through 2021, the

Shanghai Securities News reported. The provinces were given the approvals to

lower taxes and fees by the Ministry of Finance in January, 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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