MNI China Daily Summary: Friday, April 28

POLICY: China will continue to boost domestic demand via accommodative fiscal and monetary policies and government investment will play a leading role to support the economic recovery, according to a statement on the latest Politburo meeting issued by Xinhua News Agency on Friday. The Politburo reviewed Q1 economic performance to set the tone for the coming months during the high-level quarterly meeting, which stressed the lack of domestic drivers, weak demand, and challenges the economic transition faces.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY165 billion via 7-day reverse repos on Friday, with the rates unchanged at 2.00%. The operation has led to a net injection of CNY77 billion after offsetting the maturity of CNY88 billion reverse repos today, according to Wind Information. The operation aims to keep banking system liquidity stable at month end, the PBOC said on its webs

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 2.3163% from 2.2494%, Wind Information showed. The overnight repo average increased to 2.1324% from 0.8505%.

YUAN: The currency weakened to 6.9284 against the dollar from 6.9231. The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 6.9240 on Friday, compared with 6.9207 set on Thursday.

STOCKS: The Shanghai Composite Index edged up 1.14% to 3,323.27, while the CSI300 rose 1.02% to 4,029.09. Hong Kong's Hang Seng Index was up 0.27% to 19,894.57.28.

FROM THE PRESS: Chinese lenders recorded a surge of bad mortgages in 2022 as some developers failed to deliver new houses and the overall economy faced difficulties, China Business Network reported Friday. According to annual reports of 12 listed banks, newer mortgages underwater jumped by CNY47 billion in 2022, compared to only CNY3.3 billion in 2021. As one of the safest assets for lenders, the higher bad loan rate raises concerns, the report said. Outstanding mortgages of 25 listed banks rose 2% y/y in 2022, much lower than 11% in 2021. Several banks have said previously they will focus mortgages in large cities to reduce risk.

China steel mills face increasing challenges as domestic steel price continue to fall while iron ore prices remain elevated, according to People’s Day. In a quarterly press conference, officials from China Iron and Steel Association said the current inventory of major steel companies are higher than the same period last year, which has lead to a 71.49% y/y fall in profits in Q1 to CNY16 billion. Officials suggested the companies should adjust production according to the market demand and control inventory.

The Labor Day holiday, April 29 to May 3, will push consumption to recover further and perform better in Q2, Shanghai Securities News reported. Data on tourism, hotel booking and transportation all point to a robust scenario and authorities will work on plans to boost consumption, the report said. Both domestic and outbound tourism will see a rebound and railway passengers are expected to jump 20% y/y from April 27 to May 8 – a new record.