MNI China Daily Summary: Wednesday, March 20

REVIEW: The People’s Bank of China (PBOC) will likely cut its policy rates and guide down the reference lending rate later this year as inflation remains soft and weighs on the economy's real funding cost, however, its refreshed remit from the central government to ensure banks' profits and prevent idle funds could limit the reduction's size.

POLICY: China's Loan Prime Rate remained unchanged according to a PBOC statement, in line with market expectation following the February's significant LPR cut and the hold of a key policy rate on March 15. The one-year LPR, based on the PBOC’s Medium-term Lending Facility rate and quotes submitted by 20 banks, was left at 3.45% and the five-year plus maturity was held at 3.95%.

POLICY: Mainland China and Hong Kong authorities see swap connect quotas as currently sufficient, but could increase in the future should conditions change, Zhou Yu, head of the PBOC International Department told reporters.

POLICY: The PBOC is working with other government departments to create a system for cross-border flow of financial data, aiming to help foreign financial institutions reduce data compliance costs and facilitate their business in China, said Zhou.

LIQUIDITY: The PBOC conducted CNY3 billion via 7-day reverse repo, with the rates unchanged at 1.80%. The operation has led to no change to the liquidity after offsetting CNY3 billion maturity today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.8655% from the close of 1.8867% on Tuesday, Wind Information showed. The overnight repo average rose to 1.7707% from 1.7574%.

YUAN: The currency closed at 7.1993 against the dollar, unchanged from Tuesday's close. The PBOC set the dollar-yuan central parity rate lower at 7.0968, compared with 7.0985 set on Tuesday. The fixing was estimated at 7.1991 by Bloomberg survey today.

BONDS: The yield on the 10-year China Government Bond was last at 2.2860%, up from Tuesday's close of 2.2800%, according to chinamoney.com.cn.

STOCKS: The Shanghai Composite Index edged up 0.55% to 3,079.69, while the CSI300 index rose 0.22% to 3,585.38. The Hang Seng Index gained 0.08% to 16,543.07.

FROM THE PRESS: China’s securities sector will likely face accelerating mergers and acquisitions and increasing industry concentration, as the country aims to launch first-class investment banks, Securities Times reported citing market insiders. A recent document released by the China Securities Regulatory Commission proposed to form about 10 leading institutions in about five years, and build two-three investment banks with international competitiveness and market leadership by 2035.

Chinese Premier Li Qiang has signed an order promulgating increased protection of consumer rights, according to the 21st Century Business Herald. The document clarifies the government’s responsibility for protecting the interests of buyers, and instructs administrative departments to increase supervision and law enforcement. The signed document includes seven chapters and 53 articles that include tighter rules on using advanced payment practice for goods and services.

Authorities will implement a new 24-point plan aimed at relaxing foreign investment access in the economy including science and technological innovation sectors, according to the State Council. Officials will support foreign institutions to operate bank card clearing services, and expand the business scope of bond market participation. Non-Chinese firms in pilot-zones can now invest in the application of genetic diagnosis and treatment technologies and multi-nationals can equally participate in national R&D and science programmes. (Source: Yicai)