MNI POLICY: PBOC Says 'Phase One' Deal Signing Benefits Yuan

     BEIJING (MNI) - China and the U.S. signing the 'phase one' agreement

benefits them both along with the rest of the world, stokes market confidence

and will create a lasting positive impact, the People's Bank of China said

Thursday. 

     "Without a doubt, this news is linked to the yuan's recent appreciation" as

the market grows more upbeat on improved China-U.S. relations, Zhou Xuedong, the

central bank's director of general executive office said in Beijing Thursday.

     Here are the main takeaways from remarks by Zhou and Sun Guofeng, the

central bank's director of monetary policy, Ruan Jianhong, director of

statistics and analysis and Zou Lan, director of market operations:

     - China's higher total social financing last year was supported by the

growing lending to the real economy and the slower contraction of lending

through shadow banking, with a large increase in long-term loans to companies

and corporate bonds issuances, Ruan said.

     - The PBOC has pushed the reform of its loan prime rate mechanism and

improved transmission from money market rates to loan rates, Sun said. The

actual rate of the whole economy should be considered when deliberating rate

cuts, he added. The average loan rate in December 2019 was at 5.74%, the lowest

since Q2 2017, and 0.5 percentage point lower than the high point in 2018. Sun

also noted that the current benchmark deposit rate structure will remain for a

long time.

     - There is still some though limited space for RRR cuts, as the current

ratio at average 9.9% is already low compared with both advanced and emerging

economies, and China should keep some wiggle room against future risks, Sun

said.

     - The yuan's flexibility rose in 2019 with a volatility rate of 4%, Sun

said.

     - Statistics show that the banking system didn't boost loans to local

government funding vehicles to swap their debt, and long-term loans to

infrastructure sector were also steady, said Ruan.

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

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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

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