MNI China Daily Summary: Tuesday, November 20

     TOP NEWS: Central bank research head Xu Zhong noted earlier that downward

pressure on the economy has increased significantly and that China should

implement more proactive fiscal policy as monetary policy is less effective at

stimulating growth. --Comment: This should put upside pressure on rates given

the potential for inflationary fiscal stimulus which could suggest that

widespread expectations of further monetary easing before year-end are

misplaced.

     POLICY: China needs to raise the deficit-to-GDP ratio above 3% in 2019 by

boosting infrastructure investment, thus prevent further economic slowdown, Ming

Ming, chief analyst at CITIC Securities, wrote in a report. Such government-led

investment in public facilities needs to increase about 8% next year, or an

increment of CNY1.2 trillion, to achieve 7% growth in fixed asset

investment(FAI) and ultimately support nominal GDP growth of about 10%, Ming

said.

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

(OMOs) for the 18th straight day Tuesday, leaving liquidity unchanged, as no

reverse repos mature, according to Wind Information. The central bank said

liquidity in the banking system remains reasonable and ample.

     RATES: The 7-day weighted average interbank repo average rate for

depository institutions (DR007) increased to 2.6698% from Monday's close of

2.6327%, Wind Information showed. The overnight repo average rose to 2.6011%

from Monday's 2.5529%.

     YUAN: The yuan appreciate to 6.9420 against the U.S. dollar after Monday's

close of 6.9429. The PBOC set the dollar/yuan central parity rate higher for the

first time in five days at 6.9280 Tuesday, compared with Monday's 6.9245.

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

3.3750%, flat from the closing price on Monday, according to Wind Information.

     STOCK: The benchmark Shanghai Composite Index closed 2.13% lower at

2,645.85, and Hong Kong's Hang Seng Index dropped 2.02% to 25,840.34. 

     FROM THE PRESS: The PBOC's recent move to increase or confirm currency

swaps arrangements can help in the hedging of exchange rate risk, reduce

exchange costs and facilitate international financing and trade, China Business

News reported Tuesday, citing Bian Quanshui, macroeconomic analyst at Sinolink

Securities. As an additional source of liquidity in offshore markets, currency

swaps can also be used as a policy tool to stabilize the yuan rate and maintain

financial market stability, the report said, citing Bian. The PBOC has reached

or reconfirmed three currency swap deals in a month, with Bank of Indonesia, the

Bank of England and the Bank of Japan, the report said. (Link to the story:

https://bit.ly/2KeyrzE)

     The China Banking and Insurance Regulatory Commission (CBIRC) is currently

formulating a series of policies to ease financing difficulties for

private-sector companies, and is likely to release a guideline to support

private sector development this week, said the Shanghai Securities News Tuesday,

citing Zhou Liang, deputy director of CBIRC. The policies are aimed at removing

blockages between the finance sector and the real economy, the newspaper

reported, citing Zhou. (Link to the story: https://bit.ly/2ziCBlN)

     Instead of just gesturing, local governments should focus on implementing

actual and effective measures to support private-sector companies, avoiding

short-term fixes, the Economic Information Daily said Tuesday in a front-page

commentary. To restore the confidence of private enterprises, it requires

coordination of monetary, fiscal and industrial policies. In particular, the

government must treat private companies equally with SOEs, reform law, tax and

management systems and remove barriers that are not conducive to helping private

enterprises grow. (Link to the story: https://bit.ly/2KfOoFJ)

--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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