MNI China Press Digest, March 20: RRR Cut, Leverage, VAT Cut

     BEIJING (MNI) - The following lists highlights from China press reports on

Wednesday:

     The PBOC is likely to reduce the reserve requirement ratio in Q2 as a

measure to fill in the liquidity gap, the China Securities Journal reported

today. The paper says the reduction policy is also driven by the large amount of

Medium-term Lending Facilities maturing as well as large tax payments in April

and May. These liquidity conditions, along with official measures to loosen

credit supply, should make the stock market more attractive to investors but

dampen the bond market, the newspaper said.

     China's deleveraging non-financial sector helped drive leverage in the real

economy in 2018 lower for the first time since 2011, the Economic Information

Daily reported today. Leverage in the real economy in 2018 fell to 243.7% from

2017's 244%, the newspaper said. In the non-financial sector it fell to 153.6%

from 2017's 158.2%. This was despite an increase in residential sector leverage,

up 3.8 percentage points to 53.2%, fuelled by the growth in mortgage loans.

Government leverage also rose slightly to 37% from 2017's 36.4%, the paper said.

     China is set to implement a cut in VAT in two weeks, a move which is

expected to reduce the VAT tax by over CNY900 billion yuan, Shanghai Securities

News reported today. Machinery and equipment manufacturing, and the chemical

industry will be two sectors to benefit the most from the tax cut, the newspaper

said citing Tianfeng Securities. For low-margin businesses, the profit margin is

even more pronounced, with profits at brewing companies set to grow by 15% to

90% after the cut, the paper said citing Guokai Securities.

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

--MNI Sydney Bureau; +61 405322399; email: lachlan.colquhoun.ext@marketnews.com

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