MNI China Daily Summary: Wednesday, March 20

     TOP NEWS: Non-financial sector deleveraging helped drive overall leverage

in the real economy lower in 2018 for the first time since 2011, according to a

report by the Chinese Academy of Social Sciences. The overall leverage ratio of

China's real economy fell to 243.7% in 2018 from 2017's 244%. Drilling down, in

the non-financial sector the ratio fell to 153.6% from 158.2% in 2017. This was

despite an increase in residential sector leverage, up 3.8 percentage points to

53.2%, fuelled by growth in mortgage loans. Government leverage also rose

slightly (to 37% from 2017's 36.4%), the report showed.

     POLICY: The Ministry of Finance will strive to complete the drafting of a

series of tax laws covering VAT, consumption tax, urban maintenance and

construction tax, stamp duty and land VAT, according to an announcement on its

website, which omits any mention of the much-discussed property tax law.

     TRADE: U.S. Trade Representative Robert Lighthizer and Treasury Secretary

Steven Mnuchin are reported to plan to fly to Beijing next week to meet with

Chinese Vice Premier Liu He. The following week, a Chinese delegation led by Liu

is expected to continue talks in Washington, the Wall Street Journal reported,

citing Trump administration officials.

     DATA: A total of CNY782.1 billion of local government bonds were issued in

the first two months of the year, of which CNY326.1 billion were local

government special bonds, data released by the Ministry of Finance showed. 

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

operations, with no reverse repos maturing, according to Wind Information. The

total liquidity in the banking system is at a reasonable and ample level, said

the PBOC.

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

institutions (DR007) rose to 2.8000% from Tuesday's close of 2.7500%, Wind

Information showed. The overnight repo average increased to 2.7300% from

Tuesday's 2.6728%.

     YUAN: The yuan appreciated to 6.6998 against the U.S. dollar from Tuesday's

close of 6.7154. The PBOC set the dollar-yuan central parity rate at 6.7101

today, compared with 6.7062 on Tuesday.

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

3.165%, remaining flat compared with Tuesday's close, according to brokers.

     STOCKS: The benchmark Shanghai Composite Index fell 0.01% to 3,090.64. Hong

Kong's Hang Seng Index fell 0.49% to 29,320.97.

     FROM THE PRESS: The PBOC is likely to reduce the reserve requirement ratio

in Q2 in an effort to fill the liquidity gap, the China Securities Journal

reported today. The paper says the policy is also driven by the large amount of

Medium-term Lending Facilities maturing and large tax payments due in April and

May. Resulting liquidity conditions, along with official measures to loosen

credit supply, should make the stock market more attractive to investors but

dampen the bond market, the newspaper said.

     China is set to implement a VAT cut in two weeks, which is expected to

amount to over CNY900 billion yuan, Shanghai Securities News reported today.

Machinery and equipment manufacturing and the chemical industry will be two

sectors to benefit the most from the tax cut, the newspaper said, citing

Tianfeng Securities. The measure will be especially beneficial for low-margin

businesses, with profits at brewing companies, for example, set to grow by

15-90% after the cut, the paper said, citing Guokai Securities.

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

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

[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]