MNI China Daily Summary: Thursday, April 14

EXCLUSIVE: China’s struggling retail sector is making less of a contribution to growth, policy advisors told MNI, calling for authorities to intensify measures including subsidies aimed at supporting employment and schemes to issue coupons for consumers to buy cars and appliances.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.1%. 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 1.8605% from the close of 1.9150% on Wednesday, Wind Information showed. The overnight repo average fell to 1.5096% from the previous 1.6403%.

YUAN: The currency weakened to 6.3704 against the dollar from 6.3655 on Wednesday. The PBOC set the dollar-yuan central parity rate lower at 6.3540, compared with 6.3752 set on Wednesday, marking the biggest daily rise since Mar 17.

BONDS: The yield on the 10-year China Government Bond was last at 2.8025%, flat from Wednesday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index gained 1.22% to 3,225.64, while the CSI300 rallied 1.25% to 4,191.57. The Hong Kong's Hang Seng Index edged up 0.67% to 21,518.08.

FROM THE PRESS: The PBOC will cut the reserve requirement ratio in a timely manner to help banks provide credit to increase financial support for industries and small and medium enterprises affected by the pandemic, according to a State Council executive statement late Wednesday. China will boost consumption, promote spending on services such as medical and health care, and encourage purchases of cars and home appliances. Local authorities should gradually increase the quota for car purchases instead of adding new restrictions, the statement said.

China should implement more expansionary monetary and fiscal policies against the risk of a rapid economic downturn in the short term, Zhang Ming, deputy director of state-affiliated National Institution for Finance Development, said on WeChat. Reductions in the reserve requirement ratios to provide liquidity and interest rate cuts are among the measures needed, said Zhang. China’s monetary policy must be driven by domestic needs and tolerate a moderate depreciation of the yuan against the dollar, which will leave room to lower risk-free long-term rates. China can still tighten controls on capital outflows should the yuan depreciate too fast, Zhang added.

China’s export growth may continue to decelerate, but import growth will also lag, which will maintain a high trade surplus and support the yuan, according to a report by state-owned investment bank CICC. This will leave room for further monetary easing. With overseas inflation much higher, other countries still have the incentive to buy from China. However imports will continue to be dragged down by the pandemic and real estate market downturn, the report said.