MNI China Daily Summary: Wednesday, April 13

EXCLUSIVE: The most serious Covid outbreak since 2020 and soaring materials prices in the wake of the war in Ukraine are making it increasingly difficult for China to reach its 2022 growth target, leaving the People’s Bank of China (PBOC) looking for ways to channel cheap money into the economy at a time when credit demand is weak, policy advisors and economists told MNI.

DATA: Exports in March rose 14.7% y/y. March imports, however, made the first drop in 19 months, which customs said was due to the high base effect last year. The trade surplus for the first three months reached USD162.94 billion.

LIQUIDITY: The PBOC injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.10%. The operation has led to a net drain of CNY70 billion after offsetting the maturity of CNY10 billion reverse repos and CNY70 billion of Treasury's deposits at commercial banks 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 1.9150% from the previous close of 1.9728%, Wind Information showed. The overnight repo average fell to 1.6402% from the previous 1.7511%.

YUAN: The currency weakened to 6.3655 against the dollar from 6.3711 on Tuesday. The PBOC set the dollar-yuan central parity rate lower at 6.3752, compared with 6.3795 set on Tuesday.

BONDS: The yield on the 10-year China Government Bond was last at 2.8025%, down from 2.8075% on Saturday, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.82% to 3,186.82, while the CSI300 lost 0.96% to 4,139.74. The Hong Kong's Hang Seng Index gained 0.26% to 21,374.37.

FROM THE PRESS: China will continue to accelerate the sales of infrastructure-back local government special bonds and ensure the issuance of all CNY3.65 trillion of such bonds by the end of September, Shanghai Securities News reported citing Vice Minister of Finance Xu Hongcai at a Tuesday briefing. About CNY1.25 trillion of such bonds were issued as of end-March, and local governments have overcome difficulties to kick off investment projects despite the epidemic, with 75% of the projects funded by the bond having started construction so far, the newspaper said citing Xu. There are 71,000 projects in reserve awaiting to be used, covering the areas of urban pipeline network, water conservancy, information infrastructure, grain warehousing and logistics facilities, the newspaper said citing officials.

The scope of China's effort to bail out the property market has expanded with 14 more cities having loosened their housing policies in April, mainly by relaxing restrictions on purchase, loan and sales as well as lowering down payment ratio and mortgage interest rates, the Securities Times reported. Cities including some housing hotspots like Nanjing started to relax and stimulate demand, and this could be followed by more second-tier big cities with greater downward pressure, the newspaper said citing Ding Zuyu, executive director of Shanghai E-House Real Estate Research Institute. The market rebound in bigger cities will gradually transmit to third- and fourth-tier cities, said Ding. More than 60 cities have issued more than 100 real estate-related policies to prop up the market in Q1, the newspaper added.

Some of the world’s largest asset management institutions are still buying Chinese assets despite recent outbreaks of the epidemic, eyeing on China’s ample room for increased fiscal spending and monetary easing when other economies' growth momentum weakens on U.S. rate hikes and geopolitical conflicts, the 21st Century Business Herald reported citing an unidentified Wall Street hedge fund manager. Due to the recent low valuation of Chinese assets, more global asset managers are bottom-hunting boldly, or adjusting positions by selling high and repurchasing low, the newspaper said. Currently, the proportion of foreign capital in China’s bond and stock market only account for 3% and 5%, the newspaper added.