MNI China Daily Summary: Wednesday, May 20

     EXCLUSIVE: China's economy could bounce back from Covid-19 and grow by 4%

in 2020 if the outbreak remains under control and the right policies are

pursued, including an expanded fiscal deficit, an advisor to the State Council

told MNI in an exclusive interview. "I believe the Chinese economy will

stabilise and gradually improve," Liu Huan, a counsellor to the State Council,

said on Tuesday. "The most difficult period has passed; no matter what, the

outbreak has been effectively controlled domestically."

     EXCLUSIVE: China will wait to see whether intensified U.S. controls on chip

purchases by tech-giant Huawei go into effect in August before retaliating, but

would respond quickly, possibly by adding U.S. companies including Cisco to a

list of "non-reliable" entities or by blocking pending deals in China, policy

advisors and sources close to the government told MNI. Countermeasures could

come in 24 hours if the U.S. does implement the restrictions, said Mei Xinyu,

researcher at Chinese Academy of International Trade and Economic Cooperation,

affiliated with the Ministry of Commerce, although he added that China would

only act if forced to do so.

     LPR: The People's Bank of China (PBOC) kept its one-year Loan Prime Rate

(LPR) unchanged at 3.85% with the five-year LPR steady at 4.65% on Wednesday. On

April 20, the PBOC lowered its one-year LPR by 20 bps while also cutting the

five-year LPR by 10 bps.

     LIQUIDITY: The PBOC skipped open market operations for the third day,

leaving liquidity unchanged, according to Wind Information. Liquidity in the

banking system is reasonable and ample, the PBOC said on its website.

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

institutions (DR007) decreased to 1.4090% from Tuesday's close 1.4395%, Wind

Information showed. Overnight repo average fell to 1.2085% from 1.3712%

yesterday.

     YUAN: The yuan strengthened to 7.1066 against the dollar from Tuesday's

close 7.1069. PBOC set the dollar-yuan central parity rate higher at 7.0956, up

from the 7.0912 set on Tuesday.

     BONDS: The yield on 10-year China Government Bonds was last at 2.6675%,

down from Tuesday's close of 2.7150%, according to Wind Information.

     STOCKS: The Shanghai Composite Index lost 0.51% to 2,883.74. Hong Kong's

Hang Seng Index edged up 0.05% to 24,399.95.

     FROM THE PRESS: China may introduce more policies to boost private

investment in technology infrastructure, the Economic Information Daily

reported. Shanghai is setting an example encouraging banks investing in major

infrastructure projects, helping private investors' corporate bond financing and

easing requirment on their long-term loans, the daily said.

     China's aviation industry has recovered from the end of March and further

improved in May, the Securities Times reported. The daily flights on May 15

reached 10,262, or 60% of the number before the epidemic, the newspaper reported

according to the Civil Aviation Administration of China. 

--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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