MNI China Daily Summary: Friday, March 8

EXCLUSIVE: China will increase off-the-book special government debt issuance and extend its maturity to raise funds for medium- and long-term growth initiatives, while considering additional revenue sources for local governments to ease their fiscal challenges, a prominent policy advisor told MNI in an interview.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY10 billion via 7-day reverse repo, with the rates unchanged at 1.80%. The reverse repo operation has led to no change to the liquidity after offsetting CNY10 billion maturity today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.8628% from 1.8395% on Thursday, Wind Information showed. The overnight repo average increased to 1.7225% from the previous 1.7138%.

YUAN: The currency strengthened to 7.1918 against the dollar from 7.1986 on Thursday. The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.0978, compared with 7.1002 set on Thursday. The fixing was estimated at 7.1881 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.2750%, down from Thursday's close of 2.2800%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.62% to 3,046.02, while the CSI300 index was up 0.43% to 3,544.91. The Hang Seng Index rose 0.76% to 16,353.39.

FROM THE PRESS: Prices will likely return to normal levels due to expanded domestic and external demand and supply-side structural reforms, said Ning Jizhe, former director at the National Bureau of Statistics, noting the “about 3%” inflation target is a relatively reasonable level. China had experienced relatively low prices last year, but this was not necessarily “deflation” which often comes with tight money, credit supply and weak economic growth, Ning added. China’s CPI grew by only 0.2% y/y in 2023. (Source: 21st Century Business Herald)

China’s economy would benefit from expansionary fiscal and monetary policies this year needed to address persistent low levels of CPI and PPI, according to Yu Yongding, director at the Chinese Academy of Social Sciences. China’s consumption growth rate will likely fall to 5% y/y in 2024 due to base effects, but can be offset if authorities increase growth in capital formation. Yu said officials need to increase investment in high quality infrastructure projects such as sponge cities, green energy, aerospace, and health and elderly care. (Source: Yicai)

China’s exports will maintain moderate growth in 2024 following the 10.5% increase during the first two months of the year, according to Zhou Maohua, a macro researcher at China Everbright Bank. Overseas buyers have increased demand and begun inventory replenishment, which has led to better than expected results, Zhou added. Analysts were optimistic regarding stronger demand from the U.S. this year, given expectations on U.S. Federal Reserve cuts, said Bai Ming, a member of the Research Institute of the Ministry of Commerce. (Source: 21st Century Business Herald)