MNI China Daily Summary: Wednesday, November 20

     POLICY: China's central bank reduced a benchmark lending rate, the one-year

Loan Prime Rate (LPR) by 5 bps to 4.15% on Wednesday and lowered the five-year

LPR also by 5 bps to 4.80%. The cuts are in line with market expectations after

the People's Bank of China (PBOC) cut the medium-term lending facility (MLF)

rate on Nov 5 and 7-day reverse repo on Monday, both also by 5bps. An MNI

exclusive yesterday, citing advisors close to policymakers, predicted the cut.

     POLICY: The citation of national security for trade-related issues has been

exploited and abused and the practice increases tensions and protectionism, Alan

Wolff, a Deputy Director-General of the World Trade Organization, said today.

While Wolff didn't specify the target of his comment, the administration of

Donald Trump had frequently used the term to restrict the business of Chinese

technology companies including Huawei Technologies. European governments have

also aired concerns of Huawei's dominance in 5G industry.

     LIQUIDITY: The PBOC skipped open market operations, leaving liquidity

unchanged, according to Wind Information. The level of 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 2.3847% from Tuesday's close 2.5747%, Wind

Information showed. The overnight repo average fell to 1.8905% from 2.3269%

yesterday.

     YUAN: The yuan weakened to 7.0369 against the dollar from Tuesday's close

7.0238. PBOC set the dollar-yuan central parity rate weaker for a third day at

7.0118, compared with Tuesday's 7.0030.

     BONDS: The yield on 10-year China Government Bonds was last at 3.1700%,

flat from the close of Tuesday, according to Wind Information. 

     STOCKS: The Shanghai Composite Index edged down 0.78% to 2,911.05. Rare

earth and gold shares rallied as investors sought less risky alternatives, while

banking, brokerage, futures and insurance stocks fell. Hong Kong's Hang Seng

Index lost 0.75% to 26,889.61.

     FROM THE PRESS: The PBOC will continue to strengthen counter-cyclical

adjustment and increase credit support to the real economy as it seeks to

stabilize economic growth, PBOC governor Yi Gang said at a meeting on Tuesday,

according to a statement on its website. The central bank will also guide

lending rates lower and encourage banks to top up capital, according to the

statement.

     China's housing market continues to cool and the supply of commercial

residential housing may exceed demand in 2020, the Economic Information Daily

reported citing a report by the Shanghai E-House Real Estate Research Institute.

In addition to increased inventories at third and fourth-tier cities, Beijing

also has 72,800 sets of unsold houses, the highest in eight years, the newspaper

said.

     The new five-year LPR, which was cut by 5bps to 4.80% today, may stimulate

demand for home purchases, Cailian Press reported citing Yan Yuejin, director of

the E-House Real Estate Research Institute. The five-year LPR acts as a

reference for medium and long-term loans, mainly mortgage loans. The LPR cut

helps reduce cost of home purchases, the newspaper cited Yan as saying.

--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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