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Free AccessMNI 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$$$]
To read the full story
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.