1 MUFG Bank (China), Ltd. The Bank of Mitsubishi UFJ, Ltd.

BIWEEKLY DIGEST

[Economy]

IMF Cuts Down its Economic Growth Forecast by 0.4 Point for China and 0.1 Point for the World

National People's Congress Postpones Session Due to Coronavirus, New Date Not

Yet Announced

[Industry]

January Auto Sales Down 18.0% Year-on-Year (YoY), Deepening the Decline January Housing Prices for 70 Medium- to Large-Sized Cities: Fewer Cities See

Prices Rise both Month-on-Month (MoM) and Year-on-Year (YoY)

[Trade/Investment]

Inward Foreign Direct Investment (FDI) Up 2.4% for all 2019, Up 2.2% YoY in January 2020

Shandong Province’s 19 Foreign Enterprise Support Measures to be Model for All China

U.S. Punitive Tariffs on China: Exemptions for 191 Additional Products Announced from Start of this Year

Chinese Retaliatory Tariffs on the U.S.: 65 Product Categories Exempted, Individual

Applications for Import Exemptions Also to be Accepted

[Finance/Exchange]

People’s Bank of China Reduces Loan Prime Rate to Support Real Economy, First

Change in Three Months

March 6th 2020

Disclaimer This report has been prepared by MUFG Bank (China), Ltd. (the “Bank”), for information only and is not intended for use by or distribution to any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulations. The Bank and/or any person/entity connected with it may make use of or may act upon the information contained in this report prior to the publication of this report to its customers. Neither the information nor the opinion expressed herein constitute or are to be construed as an offer, solicitation, advice or recommendation to buy or sell deposits, securities, futures, options or any other financial or investment products. This report has been prepared solely for informational purposes and does not attempt to address the specific needs, financial situation or investment objectives of any specific recipient. This report is based on information from sources deemed to be reliable but is not guaranteed to be accurate and should not be regarded as a substitute for the exercise of the recipient’s own judgment. The recipient should obtain separate independent professional, legal, financial, tax, investment or other advice, as appropriate. This report is based upon the analysts’ own views, therefore does not reflect the Bank’s official views. All views herein (including any statements and forecasts) are subject to change without notice, its accuracy is not guaranteed; it may be incomplete or condensed and it may not contain all material information concerning the entities referred to in this report. None of the Bank, its head office, branches, and affiliates is under any obligation to update this report. Historical performance does not guarantee future performance. Any forecast of performance is not necessarily indicative of future or likely performance of the any product mentioned in this report. The Bank and/or its directors, officers, and employees, from time to time, may have interest and/or underwriting commitment in the relevant securities mentioned herein or related instruments and/or may have a position or holding in such securities or related instruments as a result of engaging in such transactions. Furthermore, the Bank may have or have had a relationship (for example, the relationship of affiliate, strategic partnerships, etc.) with or may provide or have provided corporate finance or other services to any company mentioned herein. The information contained herein has been obtained from sources the Bank believed to be reliable but the Bank does not make any representation or warranty nor accept any responsibility or liability as to its accuracy, timeliness, suitability, completeness or correctness. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report is not to be relied upon as a representation and / or warranty by the Bank. The Bank, its head office, branches, and affiliates and the information providers accept no liability whatsoever for any direct, indirect and/or consequential loss or damage of any kind arising out of the use of all or any part of this report. The Bank retains copyright to this report and no part of this report may be reproduced or redistributed without the written permission of the Bank and the Bank, its head office, branches, or affiliates accepts no liability whatsoever to any third parties resulting from such distribution or re-distribution

Copyright 2020 MUFG Bank (China), Ltd. All rights reserved.

CHINA BIWEEKLY

RMB Internationalization Business Promotion Office

Global Business Division

CHINA BIWEEKLY(March 6th 2020）

2 MUFG Bank (China), Ltd. The Bank of Mitsubishi UFJ, Ltd.

[Economy]

◆IMF Cuts Down its Economic Growth Forecast by 0.4 Point for China and 0.1 Point for the

World

On February 22, Kristalina Georgieva, the Managing Director of the International Monetary Fund (IMF) made remarks on China’s GDP growth rate at the G20 Finance Ministers and Central Bank Governors Meeting held in Saudi Arabia, mentioning that the spread of the coronavirus (COVID-19) is disrupting China’s economy. She revealed that IMF has cut down China’s growth rate forecast to 5.6%, down 0.4 point from the previous revision of 6.0% announced in the “World Economic Outlook” released in January. Georgieva added that that IMF will also lower the global growth rate forecast from the January 3.3% figure by about 0.1 point as well (see the table to the right).

Georgieva explained that it is impossible to give a reliable forecast as there are still many uncertainties about COVID-19, which create many possible scenarios that vary depending on how much time it will take to contain the spread of infection and for China and other countries and regions hit by the

coronavirus outbreak to recover. With that in mind, the IMF revised China’s economic growth rate for

2020 down to 5.6% based on the assumption that the “announced policies are implemented and

China’s economy would return to normal in the second quarter,” and as a result, “the impact on

the world economy would be relatively minor and short-lived.” On the other hand, Georgieva revealed that the IMF is also considering more serious scenarios in which the spread of infection would be prolonged and worsen the effects worldwide.

◆National People's Congress Postpones Session Due to Coronavirus, New Date Not Yet

Announced

On February 24, the Standing Committee of the National People's Congress (NPC; China’s national legislature) officially decided to postpone the third annual session of the 13th NPC that had been scheduled to start in Beijing on March 5 in order to put the highest priority on efforts to contain the current spread of coronavirus infections. The Standing Committee stated that the new opening date will be announced later.

The NPC is an important parliamentary gathering that discusses and decides policies on how to run China’s economy for the coming year and usually convenes in March each year. However, the postponement of this year’s annual session is thought to be due to fears that that thousands of NPC members across the country leaving their hometown to attend the meeting in Beijing may increase the risk of infection and undermine regional contagion prevention systems.

[Industry]

◆January Auto Sales Down 18.0% Year-on-Year (YoY), Deepening the Decline

According to an announcement by the China Association of Automobile Manufacturers (CAAM) on February 13, annual auto sales for January dropped 18.0% YoY to 1.941 million units (December 2019: down 0.1% YoY to 2.658 million units). This drop reveals a deepening of the decline which has been continuing for 19 consecutive months (Figs. 1 & 2).

Analyzing by vehicle type, passenger vehicle sales for January fell 20.2% YoY to 1.614 million units, with the size of the decrease increasing 19.3 percentage points. Commercial vehicle sales dropped 5.7% YoY to 326,000 units, the first such drop in this category in five months (Fig. 2).

New energy vehicles also continued their 7-month YoY drop, with January sales plunging 54.4% to

2020 growth rate

(%)

Point change from

Oct. 2019

2020 growth rate

(%)

Point change from

Jan. 2020

World 3.3 (▲0.1) 3.2 (▲0.1)

China 6.0 (+0.2) 5.6 (▲0.4)

IMF World Economic Outlook for Growth in 2020

Region

World Economic Outlook

(January 2020)

Remarks by Managing Director

Georgieva at G20 (February 2020)

Source: Created based on IMF's announcements

CHINA BIWEEKLY(March 6th 2020）

3 MUFG Bank (China), Ltd. The Bank of Mitsubishi UFJ, Ltd.

44,000 units (Figs. 2 & 3).

CAAM attributes the Chinese New Year holiday period falling in January this year and the subsequently smaller number of working days than the year before as the main cause of the drop. It points out that although the effect of the novel coronavirus epidemic on January sales was limited and manufacturers are gradually resuming operations, it is difficult for manufacturing operations to run as usual due to shortages of staff and contagion prevention items, the additional burden of virus contagion management in the production facilities, and disruption in the supply chain. Moreover, CAAM predicts the virus will have significant short-term effects and will cause a sharp drop in both production and sales in Q1, alluding to factors such as a decline in consumption as consumers refrain from going out and constraints on demand as employees of small businesses and microbusinesses in particular will experience reduced incomes. CAAM warns that while it expects a temporary rebound in demand after the situation returns to normal, it cannot give an optimistic outlook for the whole year. It also remarked that this could have long-term effects on the structure of the automotive industry worldwide.

◆January Housing Prices for 70 Medium- to Large-Sized Cities: Fewer Cities See Prices Rise

both Month-on-Month (MoM) and Year-on-Year (YoY)

On February 17, the Chinese National Bureau of Statistics (NBS) released the housing price indices for 70 medium- and large-sized cities for January.

Sale prices for newly constructed residential buildings increased over the previous month in 47 cities—three cities fewer than in the previous month, stopping the rising trend in the previous month. 15 cities experienced declines, which is one fewer than last month (Fig. 1). Meanwhile, 66 cities, two fewer cities than the month before, saw year-on-year (YoY) price increases, while four cities saw YoY price decreases (Fig. 2).

The cities with the highest rises in house prices on a MoM basis were Jinzhou (Liaoning) at 1.4%, Sanya (Hainan) at 1.3%, and Tangshan (Hebei) at 1.2%. The largest drops were in Taiyuan (Shanxi) at 0.6% followed by Fuzhou (Fujian), Jinan (Shandong), Guiyang (Guizhou), Yichang (Hubei), and Zhanjiang (Guangdong), each of which fell 0.5%. When looking at the cities by size, while the price growth rate in first-tier* cities increased from 0.2% to 0.4%, the growth rate decreased in both second-tier cities* from 0.3% to 0.2% and third-tier cities* from 0.6% to 0.4% (Fig. 3).

On a YoY basis, the cities which saw substantial growth include Hohhot (Inner Mongolia Autonomous Region) at 14.8%, Xining (Qinghai) at 14.7%, and Dali (Yunnan) at 14.1%. Declines were seen in Yueyang (Hunan) and Luzhou (Sichuan), both at 2.1% YoY, and in Shaoguan (Guangdong) at 0.5% and Jinan at 0.3%. The YoY rate of growth in first-tier cities remained the same as it did in the previous month at 3.8%, while there were declines from the previous month in second-tier cities from 7.3% to 6.9%, and in third-tier cities from 6.7% to 6.4% (Fig. 4).

* First-tier cities: Beijing, Shanghai, Guangzhou, and Shenzhen

Second-tier cities: 31 cities including provincial capitals and sub-provincial cities

Third-tier cities: The 35 remaining cities of the 70, excluding the above first- and second-tier cities

Units sold

(x Mn)vs. 2018

Units sold

(x Mn)YoY

Auto sales 25.769 ▲8.2% 1.941 ▲18.0%

Passenger vehicles 21.444 ▲9.6% 1.614 ▲20.2%

Commercial vehicles 4.324 ▲1.1% 0.326 ▲5.7%

New energy vehicles 1.206 ▲4.0% 0.044 ▲54.4%

Source: Created based on data released by the CAAM

[Fig. 2] January 2020 Auto Sales and Growth Rates

2019 January 2020

CHINA BIWEEKLY(March 6th 2020）

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CHINA BIWEEKLY(March 6th 2020）

5 MUFG Bank (China), Ltd. The Bank of Mitsubishi UFJ, Ltd.

[Trade/Investment]

◆Inward Foreign Direct Investment (FDI) Up 2.4% for all 2019, Up 2.2% YoY in January 2020

<Inward FDI>

According to an announcement* made by the Chinese Ministry of Commerce (MOFCOM) on January 21, the amount of inward foreign direct investment for the entire year of 2019 was USD 138.14 billion, up 2.4% over the previous year. While this growth is smaller than the growth rate of 3.0% seen in 2018, it remains stable. MOFCOM mentions the further cuts to the foreign industry negative list helped to improve the investment environment. However, MOFCOM believes that the novel coronavirus could effectuate large reductions to inward FDI this year.

An announcement on February 17* revealed that inward FDI for January increased 2.2% YoY to USD 12.68 billion. FDI continued its trend of growth despite a reduction in working days due to the Chinese New Year holidays occurring in January as opposed to February in the previous year. Looking at each industry, investment in the high-tech sector saw high growth. Based on data denominated in RMB, medical device manufacturing surged by 118.9% and communication devices rose 56.6%.

*From November 2019 onwards, the amount invested by each country/region is no longer reported. According to the most recent data available, the total amount invested in China from Japan for January–October 2019 was USD 3.33 billion (down 3.0% YoY).

<Outward FDI>

According to a January 22 MOFCOM announcement, outward FDI for the entire year of 2019 decreased 8.2% over the previous year to USD 110.6 billion, with the growth rate sinking into negative territory from the 0.3% growth recorded in 2018. Of total outward FDI, the investment amount to Belt-and-Road regions fell 3.8% to USD 15.04 billion, with Singapore, Vietnam, Laos, Indonesia, and Pakistan as the main recipients.

CHINA BIWEEKLY(March 6th 2020）

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◆Shandong Province’s 19 Foreign Enterprise Support Measures to be Model for All China

February 10 marked the end of the Chinese New Year holidays in many Chinese regions, extended due to the outbreak of the novel coronavirus. While businesses were expected to resume operations from that date, many are facing challenges on multiple fronts such as securing staff numbers, implementing measures to prevent contagion, and obtaining the resources necessary.

The central government and regional governments have been introducing a range of support measures to help enterprises return to normal operations. One such government is that of Shandong Province, which released a list of 19 support measures for foreign-invested enterprises (FIEs)* on February 11. In addition to providing support for securing staffing, guaranteeing passage for transportation of necessary materials, and extending deadlines for the payment of taxes and social insurance premiums. In addition, the presiding department declared that the measures would allow for an extension of the storage time provided free of charge for cargo held up at ports, and the issuance of force majeure certificates for companies unable to fulfill their contractual obligations.

*“Notification of Measures for Accelerating the Recommencement of Operations and Production by Foreign-Invested Enterprises and Promoting Investment (Luzhengbanzi [2020] No. 17)”:

http://images.mofcom.gov.cn/www/202002/20200217100832328.pdf

MOFCOM republished the measures on February 14, attaching the document to a publication (“Publication Regarding Circulation by MOFCOM of ‘Notification of Measures for Accelerating the Recommencement of Operations and Production by Foreign-Invested Enterprises and Providing Investment Support’ by Shandong Province”) and praising the measures for having “clear targets with a high level of viability and a clear division of roles.” MOFCOM expects that this will stimulate the formulation and announcement of support measures for FIEs in each region.

Measure Outline

Support for the procurement of items

to prevent contagion-

Coordination of food delivery

services

Collaborate with food and beverage enterprises that do not meet requirements for contagion

prevention to match them with restaurant owners in order to provide delivery services.

Collaboration for returning healthy

employees to work

Provide support through methods such as chartering buses to transport employees in each area and

waiving tolls for such buses.

Collaboration for resolving labor

shortages

Collaborate to secure human resources for enterprises through methods such as holding online

recruitment sessions.

Guarantee of cargo transport Guarantee priority passage for transportation of cargo necessary for production.

Financial support for provision of

credit

Allow financial institutions to support enterprises affected by coronavirus through measures such as

extending loan periods, lowering interest rates, and reducing/waiving interest on arrears.

Reduction of logistics costsGrant a 30-day extension on the free storage time for cargo held up at ports due to problems with

logistics, etc.

Reduction/exemption of urban land

use tax and property tax

Reduce/waive taxes for those who have difficulties settling their taxes because of major losses due to

the coronavirus, subject to approval by the taxation authorities.

Maximum 3-month extension of tax

settlement

Taxpayers that are unable to settle their taxes by the deadline due to the coronavirus may have the

settlement deadline extended by up to 3 months, subject to approval by the taxation authorities.

Deferral of social insurance payments

Enterprises which have suffered temporary financial difficulties due to the coronavirus may, upon

receiving approval as stipulated, defer the payment of insurance premiums for endowment plans,

unemployment, and workers' accidents for a period of up to 6 months. Late fees will not be incurred

during the deferment period and employees will continue to be covered under the social insurance as

stipulated.

Support for enterprises' efforts to

maintain employment

Enterprises that do not reduce their workforce, or enact only a small reduction, will receive a 50%

refund on their social insurance premiums paid in the previous fiscal year.

Those who are late making payments or fulfilling their contractual obligations will not be placed on

the credit blacklist if the delay was due to coronavirus.

If a contract for international trade of goods cannot be fulfilled, the provincial Sub-Council of the

China Council for the Promotion of International Trade will issue force majeure certificates upon

request.

Enhancement of legal services for

enterprise reliefCommission a specialized government team and provide an online help desk.

Enhancement of activities to attract

investment online-

Source: Created based on the announcement by Shandong Province

Main Details of the Measures for Accelerating the Recommencement of Operations and Production by FIEs and Promoting

Investment by Shandong Province

Reduction of credit risk for

enterprises

CHINA BIWEEKLY(March 6th 2020）

7 MUFG Bank (China), Ltd. The Bank of Mitsubishi UFJ, Ltd.

◆U.S. Punitive Tariffs on China: Exemptions for 191 Additional Products Announced from Start

of this Year

Since the beginning of this year, the United States Trade Representative (USTR) has announced three sets of further exemptions from the punitive tariffs against China on a total of 191 product categories.*

Announcements on January 6 and February 5 exempted 68 and 119 product categories respectively from the third round of punitive tariffs (a 25% additional tariff on USD 200 billion of Chinese goods). The products include insulated cables for medical monitoring devices, wireless chargers for mobile phones, vinyl floor tiles, and lighting equipment, and the exemption will remain in effect until August 7, 2020.

The announcement on February 11 concerned the first round of punitive tariffs (a 25% additional tariff on USD 34 billion of Chinese goods). Four product categories, which include oil/gas centrifugal pumps and lawn mower parts, were exempted for the period up to October 1, 2020.

These announcements bring the total number of exemption announcements since December 2018 up to 17, and the number of exempted product categories up to 1,430 (Fig. 1).

*Details on the exempted product categories are posted on the below websites from the USTR and the U.S. Government Publishing Office.

・January 6 announcement：https://ustr.gov/sites/default/files/enforcement/301Investigations/Exclusions_Granted_December_31%2C_2019.pdf

・February 5 announcement：

https://ustr.gov/sites/default/files/enforcement/301Investigations/%24200_Billion_Exclusions_Granted_January_31.pdf

・February 11 announcement： https://www.govinfo.gov/content/pkg/FR-2020-02-11/pdf/2020-02684.pdf

◆Chinese Retaliatory Tariffs on the U.S.: 65 Product Categories Exempted, Individual

Applications for Import Exemptions Also to be Accepted

On January 21, the Customs Tariff Commission (CTC) of the Chinese State Council announced that additional 65 product categories (55 categories on List 1 and 10 categories on List 2) which had been subject to tariffs in the third round of retaliatory tariffs against the United States (an additional 5 to 25% tariff imposed on USD 60 billion of U.S. goods) would be classified as exempt*1. This is the third such exemption announcement since September 2019, bringing the total number of exempted categories to 87 (Fig. 1).

Eligible products, including lumber, components for semiconductor production equipment, and medical devices, are exempted for one year starting from February 28, 2020. The CTC stated that the 55 product categories on List 1 would be entitled to refund if the additional tariffs had already been paid for them.

Announcement date

(Extension

announcement)

Tariff round

concernedExemption period

Announcement date

(Extension

announcement)

Tariff round

concernedExemption period

December 28, 2018 Jul 6, 2018-(Dec 28, 2019)

(December 23, 2019) Now Dec 28, 2020

2nd March 25, 2019 1st round Jul 6, 2018-Mar 25, 2020 12th November 7, 2019 3rd round Sep 24, 2018-Aug 7, 2020

3rd April 18, 2019 1st round Jul 6, 2018-Apr 8, 2020 13th November 26, 2019 3rd round Sep 24, 2018-Aug 7, 2020

1st round 1 Jul 6, 2018-Oct 1, 2020

3rd round 44 Sep 24, 2018-Aug 7, 2020

5th June 4, 2019 1st round Jul 6, 2018-Jun 4, 2020 15th January 6, 2020 3rd round Sep 24, 2018-Aug 7, 2020

6th July 9, 2019 1st round Jul 6, 2018-Jul 9, 2020 16th February 5, 2020 3rd round Sep 24, 2018-Aug 7, 2020

7th July 31, 2019 2nd round Aug 23, 2018-Jul 31, 2020 17th February 11, 2020 1st round Jul 6, 2018-Oct 1, 2020

8th August 7, 2019 3rd round Sep 24, 2018-Aug 7, 2020

1st round 310 Jul 6, 2018- Sep 20, 2020

2nd round 89 Aug 23, 2018-Sep 30, 2020

3rd round 38 Sep 24, 2018-Aug 7, 2020

1st round 92 Jul 6, 2018-Oct 2, 2020

2nd round 111 Aug 23, 2018-Oct 2, 2020

Source: Created based on announcements by the USTR

[Fig. 1] Products Exempted from the U.S. Punitive Tariffs on China

No. of

product

categories

No. of

product

categories

1st 1st round 31 11th October 28, 2019 3rd round 83 Sep 24, 2018-Aug 7, 2020

33 36

21 32

4th May 14, 2019 1st round 40 Jul 6 2018-May 14, 2020

10

December 17, 2019 45

89 68

14th

110 119

69 4

9th September 20, 2019 437

10th October 2, 2019 203

CHINA BIWEEKLY(March 6th 2020）

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On February 18, the CTC also announced that it would exempt the additional tariffs currently imposed on 696 product categories that are purchased and imported based on market principles, as part of efforts to further increase imports from the U.S. in accordance with the Phase One trade deal signed in the U.S.-China trade talks in January 2020.*2

Specifically, the CTC will require businesses to apply for tariff exemption through its online application system*3 from March 2, 2020. The details of submitted applications, including purchase/import plans and monetary amounts, will be reviewed. Companies that are approved will be eligible for an exemption on additional tariffs up to an approved monetary amount for a period of one year.

The 696 product categories cover a wide variety of products, such as soybeans, meat, crude oil, liquefied natural gas, industrial and electronic products, and consumables for personal use. Moreover, companies are also allowed to apply for exemptions on additional tariffs for the other types of product categories, if they can clarify what kind of effects these additional tariffs may have on their business.

*1 The details of the government notices and product categories eligible for tariff exemption are available on the website of the Chinese Ministry of Finance (MOF) below.

The CTC’s “Announcement on the List of the First Exemption of the Second Part of Additional Tariffs on the U.S.” (Shuiweihui guangao [2020] No. 3) http://gss.mof.gov.cn/gzdt/zhengcefabu/202002/t20200221_3472600.htm

*2 The details of the government notices and product categories eligible for tariff exemption are available on the website of the MOF below. The CTC’s “Announcement on Exemptions of Additional Tariffs on the U.S. for Eligible Products that Were Purchased Based on Market Principles” (Shuiweihui guangao [2020] No. 2)

http://gss.mof.gov.cn/gzdt/zhengcefabu/202002/t20200218_3470901.htm

*3 The online tariff exemption application system can be accessed on the MOF website below. https://gszx.mof.gov.cn

Announcemen

t date

Tariff round

concerned

No. of

product

categories

exempt

Exemption period

1st round

2nd round

1st round

2nd round

Source: Created based on announcements by the State Council Customs Tariff Commission

3rd Feb. 21, 2020 3rd round 65 Feb. 28, 2020-Feb. 27, 2021

2nd Dec. 19, 2019 6 Dec. 26, 2019–Dec. 25, 2020

[Fig. 1] Product Categories Exempted from Chinese Retaliatory Tariffs

on the U.S.

1st Sep. 11, 2019 16 Sep. 17, 2019–Sep. 16, 2020

　　　　Approx. USD110Bn

Source: Created based on announcements by the U.S. and Chinese governments

Additional tariff rate increase

25%→30%

Planned for Dec. 15, 2019

Additional tariff rate: 15%

Implemented Sep. 1, 2019

Additional tariff rate: 15%

Planned for Oct. 15, 2019

Approx. USD16Bn

USD200Bn

USD16BnUSD34Bn USD34Bn

USD16Bn

USD60Bn

Approx. USD75Bn(Additional tariffs imposedon products including items already subject to retaliatory

tariffs)

U.S. punitive measures against China

Chinese retaliatory measures against the U.S.

[Fig. 2] Additional Tariffs Levied by the U.S. and China (February 19, 2020)

1st round Implemented on July 6, 2018

2nd round Implemented on August 23, 2018

3rd roundImplemented on September 24, 2018 (U.S.: 10%, China: 5-10%)

4th round

3rd round

(additional)

U.S.: Raised tariff rates beginning on May 10, 2019 (10%→25%)China: Raised tariff rates beginning on June 1, 2019 (5-10%→5-25%)

Part 1: Implemented on September 1, 2019 (U.S.: 15%, China: 5-10%) Tariff rates to be reduced on February 14 (U.S.: 15%→7.5%, China: 5-

10%→2.5-5%)

Part 2: Postponed implementation planned for December 15, 2019 2019

①U.S.-China cabinet-level trade talks(October 10-11, 2019)

②U.S.-China Phase One trade deal

（Reached: December 13, 2019, Signed:

January 15, 2020)

Agreed to lower additional tariff rate based on ②

15%→7.5%(Effective February 14, 2020)

Agreed to postpone

implementation based on ②

Note: Figures in brackets show implemented tariff

rates.

・The Customs Tariff Commission of the Chinese State Council

(February 6 announcement):On February 14, 2020, China will reduce the additional tariff rate on

items already subject to the first part of the fourth round of punitive tariffs on the U.S. from September 1, 2019.

Agreed to postpone tariff hikes

based on ①

CHINA BIWEEKLY(March 6th 2020）

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[Finance/Exchange]

◆People’s Bank of China Reduces Loan Prime Rate to Support Real Economy, First Change in

Three Months

On February 20, the People’s Bank of China (PBOC) lowered the loan prime rate (LPR). The PBOC lowered both the rate for one-year loans by 0.1 point to 4.05%, and the rate for loans of five years or longer by 0.05 point to 4.75%.

Announced on the 20th of each month, the LPR has been used as a benchmark interest rate for bank loans since the PBOC implemented financial system reforms in August 2019.* The LPR had remained unchanged since the PBOC last reduced it three months prior, on November 20, 2019. This is effectively an interest rate cut, and the highest reduction for one-year loans at 0.1 point since August 2019. It appears that the government aims to support small- and medium-sized businesses who are struggling with financing because of the coronavirus outbreak by reducing lending costs in the real economy.

* Summary of the LPR system reform implemented by the PBoC on August 17, 2019: This was a part of financial system reforms and was designed to improve the mechanism of monetary effects and the like brought on by interest rates. The PBoC requested banks to use the LPR for lending in place of the standard interest rate that was previously referred to as a lending benchmark, stating that it would release the LPR, which is calculated based on loan interest rates reported by 18 banks, on the 20th of each month. The PBoC added a rate for loans of five years or longer to supplement the original LPR for one-year loans.