MNI China Daily Summary: Wednesday, February 12

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

on Wednesday, leaving liquidity unchanged, according to Wind Information. Total

liquidity in the banking system is relatively high, PBOC said.

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

institutions (DR007) increased to 2.2125% from Tuesday's close 2.1510%, Wind

Information showed. Overnight repo average fell to 1.4950% from 1.5292%

yesterday.

     YUAN: The yuan strengthened to 6.9730 against the dollar from Tuesday's

close 6.9775. PBOC set the dollar-yuan central parity rate lower at 6.9718,

compared with 6.9897 on Tuesday.

     BONDS: The yield on 10-year China Government Bonds was last at 2.8550%,

unchanged from Tuesday's close, according to Wind Information.

     STOCKS: The Shanghai Composite Index gained 0.87% to 2,926.90. Hong Kong's

Hang Seng Index also rallied 0.87% to 27,823.66.

     FROM THE PRESS: China should strive to stabilize 2020 growth at about 5% by

raising the deficit-to-GDP ratio above 3% and issuing CNY1 trillion special

government bonds to support tax and fee cuts for small companies and transfer

payments for areas affected by the coronavirus outbreak, Huang Qifan, vice

chairman of the China Center for International Economic Exchanges and a former

mayor of Chongqing city, wrote in the China Economic Weekly. The central bank

should also step up its purchases of government bonds and further lower the

reserve requirement ratio and interest rates after the epidemic eases in Q2,

said Huang.

     The PBOC is likely to conduct medium-term lending facility (MLF) with a

lower interest rate next week to offset the maturity of a large amount of

reverse repos, the China Securities Journal reported citing analysts. Monetary

policy will focus on adjusting policy interest rates and offering targeted

support to areas affected by the coronavirus epidemic, and the central bank will

still inject certain short-term liquidity to offset CNY1.42 trillion of reverse

repos set to mature by the end of February, the newspaper said.

     The coronavirus outbreak in China may peak in later February and then

plateau and decrease, the official news website Huanqiu reported citing Zhong

Nanshan, China's senior medical adviser, who forecast based on mathematical

modelling. The turning point of the epidemic depends on prevention and people

travelling from their hometowns back to cities for work, Huanqiu cited Zhong as

saying.

     About 34% of small businesses may run out of cash in a month, while 33.1%

can sustain only two months, the 21st Century Business Herald reported citing a

survey of 995 small and medium Chinese companies by Peking and Tsinghua

Universities. Banks are concerned with the potential increase in non-performing

loans, which will keep them from lending to small companies, the newspaper said

citing sources at banks.

--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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