MNI China Daily Summary: Friday, April 26

EXCLUSIVE: China’s yuan will likely test 7.30 against the greenback in the short term should the U.S. dollar index movetoward 107, but continue to depreciate more slowly than other currencies as the People’s Bank of China sets relatively strong fixings and tight offshore liquidity shores up the CNH rate outside the mainland, policy advisors and traders told MNI.

POLICY: China and the U.S. should strengthen dialogue, manage differences and advance cooperation, Chinese President Xi Jinping said during his meeting with U.S. Secretary of State Antony Blinken in Beijing on Friday, as there are still issues to be addressed which require further efforts.

LIQUIDITY: The PBOC conducted CNY2 billion via 7-day reverse repo, with the rates unchanged at 1.80%. The operation has led to no change to the liquidity after offsetting the maturity of CNY2 billion today, according to Wind Information.

RATES: China's seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.9315% from 1.9161%, Wind Information showed. The overnight repo average increased to 1.8730% from 1.8559%.

YUAN: The currency strengthened to 7.2463 against the dollar from 7.2471 on Thursday. The PBOC set the dollar-yuan central parity rate lower at 7.1056, compared with 7.1058 set on Thursday.

BONDS: The yield on 10-year China Government Bonds was last at 2.3525%, up from 2.3050% at Thursday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 1.17% to 3,088.64 while the CSI300 index increased 1.53% to 3,584.27. The Hang Seng Index was up 2.12% to 17,651.15.

FROM THE PRESS: The People's Bank of China will effectively maintain currency stability and financial stability, while coordinating security with development and opening up, as well as balancing stabilising growth and preventing risks, according to an article by the Party Committee of the PBOC published on the party-run People’s Daily. The central bank will adhere to “steady and prudent” operations, instead of taking excessive risks beyond its capacity, the article said.

Any treasury trades by the People’s Bank of China would not equal Quantitative Easing, as the PBOC can either buy treasuries in the secondary market to release liquidity or sell them to guide market interest rates back up, Securities Daily reported citing Feng Lin, director of research at Golden Credit Rating. There is no prerequisite and necessity for the implementation of QE in China, the newspaper said, noting the open market operations and medium-term lending facility rates are 1.8% and 2.5%, far from zero interest rates. The PBOC still has ample room to cut rates and reserve requirement ratios and does not need treasury trades in the short term, the daily said citing analysts.

Authorities expect Guangdong’s foreign trade to maintain growth in H1 following Q1’s import and exports reaching CNY2.04 trillion, up 12% y/y, the best performance in 11 quarters, according to Zhang Ke, deputy director of the Guangdong General Administration of Customs. In Q1, exporters saw sales of high-end equipment such as ships, machine tools and aircraft grow by 55%, 32% and 78% respectively. The Guangdong Customs Trade Prosperity Survey in March increased 4.6pp from February. (Source: 21st Century Business Herald)