MNI China Press Digest Mar 18: Rate Cut, Trade Surplus, PBOC

Highlights from Chinese press reports on Monday:

• The People’s Bank of China will likely cut the rate of the medium-term lending facility by 10-20 bps in Q2, despite keeping the rate unchanged last week, said Wang Qing, chief macro analyst at Golden Credit Rating. Cutting the MLF and deposit rate remains highly necessary. Pressure on the net-interest margin of commercial banks has increased after the 5-year Loan Prime Rate was lowered by 25 bps, while the PBOC held the anchor MLF in February, said Ming Ming, chief economist at CITIC Securities. Analysts also expect the LPR to remain steady in March. (Source: Securities Daily)
• The impact of the expanded trade surplus on the economy should not be overestimated, as the widening trade services deficit could offset it, noted Guan Tao, a former official at the State Administration of Foreign Exchange in an article published by Yicai. External demand as an economic driver corresponds to the balance of goods and services released by SAFE, not the trade balance released by Customs, Guan noted. In January, the 57% y/y growth in service deficit, mainly due to rebounding outbound tourism, offset the 18.3% growth in goods surplus, leading to 1.3% growth in the surplus of goods and services, Guan said.
• The People’s Bank of China will explore paths to help China become a greater financial power, including measures to build a modern central bank system, a strong international financial centre and steadily promote the internationalisation of the yuan, according to a statement on its website Saturday. PBOC Governor Pan Gongsheng said becoming a financial power will require, not only a strong economic foundation, but also continuous financial reform and international financial cooperation, as well as improved rules, regulations, management, and standards in the financial sector.