MNI China Daily Summary: Wednesday, February 5

     EXCLUSIVE: The coronavirus outbreak may shave China's Q1 growth by as much

as a full percentage point from last quarter to 5% as knock-on effects in the

crucial services industry are amplified, clouding the outlook for full-year

2020, according to advisors close to the government interviewed by MNI. "Growth

could register 5.6% to 5.7% (this year) if the situation is contained this month

and contingency policies are enforced effectively and in a timely fashion. If

not, GDP could drop below 5.5%," said Zhang Ming, a senior fellow at the

Institute of World Economic and Politics under the Chinese Academy of Social

Sciences.

     DATA: The Caixin China services PMI fell to 51.8 in January from 52.5 the

previous month, the lowest since November 2019. New orders sub-index eased to

three-month low due to slowing domestic demand while new export orders

accelerated on strengthened overseas demand. The official PMI for the services

sector released Jan. 31 rose 0.1 to 53.1.

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

on Wednesday, draining CNY30 billion after the maturity of reverse repos,

according to Wind Information. Current liquidity can meet demand, PBOC said on

its website.

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

institutions (DR007) decreased to 2.2952% from Tuesday's close 2.4094%, Wind

Information showed. Overnight repo average fell to 1.9454% from 2.2243%

yesterday.

     YUAN: The yuan weakened to 6.9997 against the dollar from Tuesday's close

6.9900. PBOC raised the dollar-yuan central parity rate to 6.9823 from 6.9779 on

Tuesday, the highest since Dec. 27, 2019.

     BONDS: The yield on 10-year China Government Bonds was last at 2.8700%,

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

     STOCKS: The Shanghai Composite Index rallied 1.25% to 2,818.09 following

the PBOC's large liquidity injection yesterday. Hong Kong's Hang Seng Index

gained 0.42% to 26,786.74.

     FROM THE PRESS: China should use local government special-purpose bonds and

offer credit through policy banks to increase infrastructure investment and ease

economic turbulence resulting from the coronavirus outbreak, the China

Securities Journal said in a front-page commentary. Still, Q1 growth accounts

for the smallest portion of the full-year GDP expansion, the newspaper said.

     Investment in networking infrastructure and services in China may exceed

CNY5 trillion this year including further expansion of 5G networks and other

high-tech communications, on growing need for emergency response and remote

working and education following the coronavirus epidemic, the Securities Daily

reported citing Tang Chuan, an analyst at the China Public Private Partnerships

Center. 

--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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