MNI China Daily Summary: Thursday, March 10

EXCLUSIVE: The People’s Bank of China is likely to push banks to reduce loan rates and support the property sector while keeping a lid on the cost of deposits as it loosens policy in support of the government’s target for growth of about 5.5% this year, current and former PBOC officials told MNI in interviews on the sidelines of the National People’s Congress.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.2% on Thursday. 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) increased to 2.0752% from the close of 2.0515% on Wednesday, Wind Information showed. The overnight repo average rose to 2.0289% from the previous 2.0163%.

YUAN: The currency weakened to 6.3216 against the dollar from 6.3163 on Wednesday. The PBOC set the dollar-yuan central parity rate lower at 6.3105 on Thursday, compared with 6.3178 set on Wednesday.

BONDS: The yield on the 10-year China Government Bond was last at 2.8550%, flat from Wednesday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index rallied 1.22% to 3,296.09, while the CSI300 rose 1.57% to 4,292.84. The Hong Kong's Hang Seng Index gained 1.27% to 20,890.26.

FROM THE PRESS: China’s PPI, measuring factory-gate inflation, may reverse its current deceleration and begin to rise faster in March, as international crude oil and some non-ferrous metal prices will increase significantly amid geopolitical tensions, Yicai.com reported citing Wang Qing, analyst with Golden Credit Rating. February PPI reversed the previous slides to rise 0.5% m/m, a sign of imported inflation picking up, the newspaper said. China should fully release domestic production capacity of energy and heavy chemical industries to help stabilize prices, as well as crack down on excessive financial speculation, the newspaper said citing Zhang Liqun, researcher, Development Research Center of the State Council.

The People’s Bank of China, which revealed more than CNY1 trillion of its profits from FX reserves to the central fiscal coffer last night, is likely to create a CNY7.23 trillion increase in M2 this year, or boosting annual M2 growth by 3 pp by yearend, the Securities Times reported citing economist Guan Tao of Bank of China International. The over CNY1 trillion extra liquidity will lower borrowing rates in the real economy, and the liquidity boost through this remittance differs from an RRR cut, which impacts funding for the medium to long terms, Guan said.

China may further ease controls over the real estate sector to help achieve the 5.5% GDP target, set at the high end of the expected range, and requiring a more stable real estate development, Yicai.com said citing industry insiders. Whist the authorities insist on "houses are not for speculation", there will be more support for buying by new urban residents, who move to new cities for jobs or child education, Yicai said. 2022 may also see explosive growth in guaranteed rental housing to accommodate lower-income people such as youth housing, it said. The housing market may recover in the later period of Q2, Yicai said citing analysts.