MNI China Daily Summary: Thursday, March 17

EXCLUSIVE: China’s consumer price inflation may top 3% for some months this year, as the war in Ukraine drives global energy and raw material costs still higher, but weak domestic demand should still allow policymakers room for monetary and fiscal stimulus, policy advisors told MNI. Increased fuel prices will add to transportation fees and costs of everything from food to consumer goods, said Wang Jun, academic committee member at the China Center for International Economic Exchanges.

POLICY: China will continue normal economic and trade cooperation with both Russia and Ukraine based on mutual respect and mutual benefit, said Gao Feng, spokesman of the Ministry of Commerce at a briefing on Thursday. “China opposes any form of unilateral sanctions and long-arm jurisdiction that have no basis in international law,” said Gao, when asked to comment on U.S. politicians’ warning of consequences if China helped Russia evade sanctions.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY80 billion via 7-day reverse repos with the rate unchanged at 2.10%. The operation has led to a net injection of CNY70 billion 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 2.0792% from the close of 2.1121% on Wednesday, Wind Information showed. The overnight repo average fell to 1.9980% from the previous 2.0257%.

YUAN: The currency weakened to 6.3494 against the dollar from 6.3465 on Wednesday. The PBOC set the dollar-yuan central parity rate lower at 6.3406, compared with 6.3800 set on Wednesday.

BONDS: The yield on the 10-year China Government Bond was last at 2.8000%, down from 2.8050% of Wednesday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index gained 1.40% to 3,215.04, while the CSI300 rose 1.96% to 4,237.70. The Hong Kong's Hang Seng Index rallied 7.04% to 21,501.23.

FROM THE PRESS: The PBOC is likely to cut interest rates and banks’ reserve requirement ratios in March or the second quarter following the Financial Stability and Development Committee's call for more proactive monetary policy to stabilize growth, the 21st Century Business Herald reported citing Tang Jianwei, chief researcher with Bank of Communications. China should increase credit easing given the current economic downward and cuts to interest rates and RRRs may be necessary should the real estate market falls further or GDP growth slows to below 5%, the newspaper said citing Wang Qing, an analyst with Golden Credit Rating.

China is expected to introduce stronger support policies soon to revive the real estate sector after the publicized Financial Stability and Development Committee meeting on Wednesday, said the Securities Times citing Yan Yuejin, director of E-house China Research and Development Institution. Following the committee's announcement, The Finance Ministry halted the expansion of the pilot property tax program, while the central bank and the China Securities Regulatory Commission said they will focus on resolving the risks of developers, the newspaper said. New measures that may be introduced should help real estate stocks reverse bearishness, and inject confidence into developers and home buyers, the newspaper said citing Yan.

The resilience and potential of the Chinese economy are much better than imagined by some people, and the “China collapse” theory has always collapsed first, the state-owned Global Times said in an editorial, following the Financial Stability and Development Committee meeting on Wednesday, which tried to calm a nervous financial market by assuring the government is prioritizing market-friendly policies. With the CPC Central Committee's resolute leadership, the Chinese economy can definitely overcome difficulties and move forward steadily, the newspaper said.