MNI China Daily Summary: Wednesday, February 26

     LIQUIDITY: Liquidity flowed through the China interbank market in February,

boosted by huge liquidity injections by a central bank looking to tackle the

impact of the coronavirus outbreak, the latest MNI Liquidity Conditions Index

shows. The index dropped to a record low 0.0 in February, with 100.0% of the

respondents reporting a loosening in conditions from the previous month. That

compared to a reading of 84.6 in February. The higher the index reading, the

tighter liquidity appears to survey participants.

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

for the seventh day on Wednesday, 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) decreased to 2.0632% from Tuesday's close 2.0704%, Wind

Information showed. Overnight repo average fell to 1.4758% from 1.5822%

yesterday.

     YUAN: The yuan slipped to 7.0170 against the dollar from Tuesday's close

7.0162. PBOC set the dollar-yuan central parity rate lower for a second day at

7.0126, compared with 7.0232 on Tuesday.

     BONDS: The yield on 10-year China Government Bonds was last at 2.8300%,

down from Tuesday's close of 2.8500%, according to Wind Information.

     STOCKS: The Shanghai Composite Index lost 0.83% to 2,987.93. Hong Kong's

Hang Seng Index fell 0.73% to 26,696.49.

     FROM THE PRESS: China will exempt value-added taxes for those with less

than CNY5 million taxable revenues in Hubei province, the epicentre of the

coronavirus outbreak, and lower the tax rate to 1% from 3% in other regions from

March to May, according to a statement on the government website citing the

State Council executive meeting late Tuesday. China will also add CNY500 billion

in refinancing and rediscount quotas, mainly to increase small and medium banks'

credit support for small firms. Policy banks will increase CNY350 billion in

special credit lines, which would be issued to private and small companies at

preferential interest rates, according to the statement.

     The PBOC and the China Banking and Insurance Regulatory Commission (CBIRC)

will maintain liquidity and encourage commercial banks to provide differentiated

credit arrangements for SMEs, the People's Daily reported citing Guo Shuqing,

head of the CBIRC. The financial industry has been steered to supporting the

resumption of production, while regulators will firmly avoid systemic risks, the

daily said.

     The CBIRC asked banks to allow SMEs postpone their loan repayments until

the end of June, the Securities Times reported citing Xiao Yuanqi, spokesman of

the CBIRC. CBIRC has not changed its tight policy on financing for real estate

developers, while policy details for some banks have been tweaked under the

basic framework, the newspaper cited Xiao as saying.

     China's daily passenger car sales in the week ended Feb. 23 fell 83% from a

year ago to 5,411 units, Yicai.com reported citing data by the China Passenger

Car Association. Sales rose 32% from the previous week, a moderate recovery, the

association was cited by Yicai as saying.

--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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