MNI China Daily Summary: Wednesday, March 27

     POLICY: The China Banking and Insurance Regulatory Commission has given the

greenlight to set up the first foreign-funded pension business in China, in a

move to liberalize the private pension market, a statement on its website said

today. Heng An Standard Life, a joint venture insurer in China backed by the UK

asset manager Standard Life Aberdeen will establish a unit to run the pensions

business.

     DATA: Industrial profits for the first two months of 2019 fell 14.0% y/y,

extending the 1.9% y/y decline seen in December last year and falling for a

fourth consecutive month, data released by the National Bureau of Statistics

showed. Losses in the automotive, petroleum processing, steel and chemical

industries have dragged overall industrial profit growth down by 14.2 percentage

points. If these sectors are excluded, profit growth would have increased by

0.2% y/y, the NBS said.

     DATA: China Development Bank has provided more than $190 billion of funds

to over 600 Belt and Road projects since the Belt and Road Initiative started in

2013, Shanghai Securities News reported citing CBD vice-chair Zheng Zhijie. By

end-2018, the outstanding of investment for Belt and Road countries were $109

billion, Zheng said.

     LIQUIDITY: Liquidity in China's interbank market was seen tighter in March,

with higher rates, seasonal cash drains and a slowing of injections by the

People's Bank of China all contributing, the latest MNI China Interbank

Liquidity Survey showed. A deterioration in liquidity conditions was seen by

71.4% of respondents, up from 46.7% in February, with no respondents seeing any

signs of improved liquidity conditions. "Conditions have tightened since

mid-month as corporate tax payments and reserve requirement ratio deposits

changes scrambled liquidity. Banks are preparing for the PBOC's quarterly

Macro-Prudential Assessment (MPA), which adds pressure on the interbank market,"

a Shanghai trader at a state-owned bank told MNI.

     LIQUIDITY: The PBOC skipped open market operations for the sixth-straight

trading day, leaving liquidity unchanged as no reverse repos matured, according

to Wind Information. Total liquidity in the banking system is at a reasonable

and ample level, the PBOC said.

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

institutions (DR007) rose to 2.9000% from Tuesday's close of 2.8001%, Wind

Information showed. The overnight repo average decreased to 2.1000% from

Tuesday's 2.4872%.

     YUAN: Dollar-yuan rose to 6.7215 against from Tuesday's close of 6.7129.

The PBOC set the dollar-yuan central parity rate at 6.7141 today, compared with

6.7042 set on Tuesday.

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

3.0975%, down 0.75 bps from Tuesday's close, according to brokers. The yield

extended its slide into a fourth trading day.

     STOCKS: The benchmark Shanghai Composite Index rose 0.85% to 3,022.72. Hong

Kong's Hang Seng Index rose 0.56% to 28,728.25.

     FROM THE PRESS: China will halve subsidies to electric automakers this year

and remove all subsidies by the end of 2020, according to the Ministry of

Finance and three other ministries. A statement on the MOF website said the

ministries are working on new policies to support fuel cell vehicles and

accelerate the use of electric buses.

     Monetary policy will remain in a loose bias in Q2 and the PBOC may lower

the reserve requirement ratio by 50 bp in April, said Song Xuetao, head of the

research team at Tianfeng Securities. In a research report, Song said the yield

on the 10-year China Government Bond could fall below the 3.0% level and hit

2.9% if there is a RRR cut in April. The economy is still in a short-cycle

downturn in Q2, mainly dampened by sluggish external demand, Song added.

     The market for established houses is warming up in hotspot cities with both

prices and the number of transactions rebounding, according to a report

published by Industrial Securities. The report says that prices of established

houses in Beijing, Shanghai and Shenzhen have increased 4%, 12% and 8%

respectively since the beginning of this year, with transaction volumes in

Beijing and Shenzhen up by 40% y/y as of this week. The report says the outlook

for established housing in first and second-tier cities is positive in the

coming years.

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

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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