MNI China Daily Summary: Friday, February 24

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY470 billion of operations via 7-day reverse repos on Friday, with the rates unchanged at 2.00%. The operation led to a net drain of CNY365 billion after offsetting the maturity of CNY835 billion reverse repos today, according to Wind Information. The operation aims to keep banking system liquidity stable towards the end of month, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) edged up to 2.2584% from 2.1766% on Thursday, Wind Information showed. The overnight repo average increased to 1.4396% from the previous 1.4264%.

YUAN: The currency closed at 6.9442 against the dollar at 16:30pm Beijing time from 6.8918 on Thursday. The PBOC set the dollar-yuan central parity rate lower at 6.8942 on Friday, compared with 6.9028 set on Thursday.

BONDS: The yield on the 10-year China Government Bond was last at 2.9180%, down from Thursday's close of 2.9250%.

STOCKS: The Shanghai Composite Index fell 0.62% to 3267.16, while the CSI300 index was down 1.04% to 4,061.05. The Hang Seng Index was down 1.68% to 20,010.04.

FROM THE PRESS: January data on domestic consumption shows the recovery is on track and all parties are confident in the market rebound for this year, according to a statement made by China’s Ministry of Commerce. Additionally, the ministry was aware of dozens of high level multinational leaders planning visits to China this year, which shows positive signs for foreign firms' engagement. The first month of the year also showed overseas investment up 14.5% y/y, indicating international firms’ confidence in China over the long run. China welcomed recent positive developments in the Philippines regarding their entry into the Regional Comprehensive Economic Partnership Agreement (RCEP), MOFCOM said.

Provincial data shows investment in major projects around China are off to a strong start in 2023 and will play an important foundation in the economic recovery this year, according to Sheng Chaoxun, Director of the China Macroeconomic Research Institute. Guangzhou authorities are targeting CNY1 trillion in fixed asset investment across 2023, and have signed or started projects worth CNY680 billion so far this year. Shenzhen has launched 266 new construction projects with a total investment of approximately CNY329.5 billion in so far in Q1. Sheng said high-quality industrial projects will play a leading role, with 5G, industrial Internet and data centers being a strong focus. (Source: Shanghai Securities News)

Policies designed to stabilise growth following the pandemic may increase pressure on local fiscal balances and lead to further risks of hidden debt at regional level, according to analysts interviewed by the Securities Times. The paper said work reports by several regional governments this year have highlighted the added risk and have taken measures to step up supervision and monitoring, such as ensuring debt interest and interest rate cuts are fully accounted for in their budgets. According to one analyst, local debt problems could be solved by moving away from the “land sale financing model” to a more self-sustaining basis founded on industrial and commercial activities.