MNI China Daily Summary: Wednesday, March 9

EXCLUSIVE: China is counting on more proactive fiscal policy to drive investment this year, but consumption will also need to recover to close to pre-pandemic levels as officials push to meet the 2022 economic growth target of around 5.5%, the former head of the country’s top planning body told MNI on the sidelines of the National People’s Congress this week.

DATA: China's February consumer price index rose 0.9% y/y in line with the forecasts, but month-on-month gained on rising global energy and commodity prices, data from the National Bureau of Statistics on Wednesday showed. On a monthly basis, CPI rose 0.6%, compared to January's 0.4%. The producer price index measuring factory gate prices further eased for the fourth month to 8.8% y/y from January's 9.1% y/y, but higher than the 8.6% forecast. On a monthly basis, PPI gained 0.5% due to surging crude oil, non-ferrous metals, and other commodity prices, the NBS said.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.2%. This keeps the liquidity unchanged after offsetting the maturity of CNY10 billion repos today, according to Wind Information. The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 2.0515% from the close of 2.0888% on Tuesday, Wind Information showed. The overnight repo average fell to 2.0163% from the previous 2.0337%.

YUAN: The currency weakened to 6.3163 against the dollar from 6.3141 on Tuesday. The PBOC set the dollar-yuan central parity rate lower at 6.3178, compared with 6.3185 set on Tuesday.

BONDS: The yield on the 10-year China Government Bond was last at 2.8525%, up from 2.8375% of Tuesday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index lost 1.13% to 3,256.39, while the CSI300 lost 0.92% to 4,226.35. The Hong Kong's Hang Seng Index fell 0.67% to 20,627.71.

FROM THE PRESS: The Chinese yuan is supported by inflows of funds from Europe seeking to avoid geopolitical turmoil, hedge funds' bullishness on the currency after China reported robust trade, as well as foreign exchange settlements by trade companies, the 21st Century Business Herald reported citing traders. The first two factors lead to more than half of new yuan trading activities in the offshore market since last week, the newspaper said. Wall Street investment institutions have raised the short-term expectation of yuan to around 6.25 against the U.S. dollar, but few expect rapid gain fearing the recent strength in the dollar index, the newspaper said.

The unprecedented surge in the price of nickel on the London Metal Exchange in the last two days has disrupted China’s downstream industrial production, the 21st Century Business Herald said. Some nickel suppliers stopped accepting orders to wait out the turmoil, the newspaper said. On Tuesday, a major stainless-steel exchange in the eastern city of Wuxi halted nickel trading due to uncertainties, the newspaper said. Nickel is an essential metal for producing stainless steel and batteries. The price of nickel surged as much as 250% in two days, touching record USD101,365 per ton, fueled partly by the speculation that top Chinese producer Tsingshan was caught in a massive short squeeze.

China still has large potential space to boost effective investment to power its economic growth, including 102 mass projects to be carried out through 2025, the Economic Information Daily reported citing He Lifeng, director of the National Development and Reform Commission. China's investment priorities are to strengthen the weak links of infrastructure, reduce carbon emission and develop emerging industries and urbanization, the newspaper said citing He.