MNI China Daily Summary: Tuesday, March 5

     TOP NEWS: Premier Li Keqiang said China is aiming for economic growth of

between 6.0-6.5% in 2019, down from a target of 6.5% last year. M2 and aggregate

financing to the economy will "match nominal GDP growth," according to the

Government Work Report (GWR) delivered by Premier Li during the opening ceremony

of the National People's Congress (NPC) today. The budget deficit is projected

at 2.8% of GDP in 2019, compared with 2.6% in 2018, and fiscal policy will be

"proactive, stronger and more effective," the GWR states. The 2019 CPI target is

set at 3.0%, unchanged from last year.

     NPC: China plans to carry out larger-than-expected taxes and fee cuts this

year, which will reduce corporate tax and enterprise contributions to social

insurance by about CNY2 trillion, compared to a CNY1.3 trillion cut in 2018,

according to the GWR. VAT will be lowered to 13% from 16% for the manufacturing

sector, and to 9% from 10% for the transportation and construction sectors.

     POLICY: China is studying ways to restructure high-risk financial

institutions this year, allowing some to "exit the market" while allowing others

to be bought out or merged, Guo Shuqing, chairman of the China Banking and

Insurance Regulatory Commission, said on the sidelines of the NPC.

     POLICY: China's labour market is robust enough to absorb external shocks,

Cai Fang, a vice president of the Chinese Academy of Social Sciences, told MNI

today. Without identifying the trade war with the U.S. as a concern, Cai said

the current job market is stable, with unemployment around 5%, in line with

recent years. The number of rural migrant workers is declining, suggesting that

labour supply is tightening, said Cai, a noted expert on population and the

economy.

     TRADE: China can assure U.S. negotiators it will keep its currency stable,

though it is unlikely to commit to a specific value, said Li Daokui, a former

member of the Monetary Policy Committee of the People's Bank of China (PBOC), on

the sidelines of the NPC. "Such demand by the U.S. is consistent with China's

need," Li said.

     LIQUIDITY: The PBOC skipped open market operations, resulting in a net

drain of CNY120 billion due to maturing reverse repos, according to Wind

Information. Total banking system liquidity is high enough to offset maturing

reverse repos, the PBOC said.

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

institutions (DR007) increased to 2.5000% from Monday's close of 2.2480%,

according to Wind Information. The overnight repo average fell to 1.9000% from

1.9278% on Monday.

     YUAN: The yuan depreciated to 6.7038 against the U.S. dollar from Monday's

close of 6.6991. The PBOC set the dollar-yuan central parity rate stronger at

6.6998 today, compared with 6.7049 on Monday.

     STOCKS: The benchmark Shanghai Composite Index rose 0.88% to 3,054.25. Hong

Kong's Hang Seng Index increased 0.01% to 28,961.60.

     BONDS: The yield on the 10-year China Government Bond was last at 3.225%,

up 1bp from Monday's close, according to brokers.

     FROM THE PRESS: China should have a schedule in place for deleveraging,

Wang Yiming, vice chairman of the Development Research Centre of the State

Council was cited as saying by China Securities Journal. "To stabilise leverage"

is of top priority as any sharp drops could lead to tighter liquidity and thus

weigh on growth, Wang added.

     Efforts to push ahead with mixed ownership reforms will be accelerated this

year, with several central state-owned enterprises seeking listings and the

diversification of shareholding structures, the Economic Information Daily

reported, citing interviews with executives attending the Chinese People's

Political Consultative Conference.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI London Bureau; +44 207-862-7489; email: ukeditorial@marketnews.com

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