MNI China Daily Summary: Friday, May 10

EXCLUSIVE: Major cities will significantly relax homebuying restrictions to help reduce housing inventory in line with Beijing’s latest policy directive, advisors and analysts told MNI, adding that local authorities could absorb developers’ unsold stock into social-housing programmes.

POLICY: European firms have increased pessimism over China's economic conditions, a business confidence report from the European Chamber of Commerce said. A total of 55% of members ranked the country's economy woes as a top-three concern, up 19 pp y/y, the report showed.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY2 billion via 7-day reverse repo, with the rates unchanged at 1.80%. The operation has led to a net injection of CNY2 billion as no repos matures today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.8228% from 1.8249% on Thursday, Wind Information showed. The overnight repo average increased to 1.7312% from the previous 1.7234%.

YUAN: The currency strengthened to 7.2246 against the dollar from 7.2258 on Thursday. The PBOC set the dollar-yuan central parity rate lower at 7.1011, compared with 7.1028 set on Thursday. The fixing was estimated at 7.2128 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.3200%, up from Thursday's close of 2.3150%, according to chinamoney.com.cn.

STOCKS: The Shanghai Composite Index edged up 0.01% to 3,154.55, while the CSI300 index was up 0.05% to 3,666.28. The Hang Seng Index rallied 2.30% to 18,963.68.

FROM THE PRESS: China’s steel firms have recently increased exports in an “unsustainable manner” using high volumes and low prices, with the industry at risk of intensified trade frictions, Chen Yuqian, deputy secretary-general of the China Iron and Steel Association, told 21st Century Business Herald. Data from the National Bureau of Statistics showed steel export volumes increased 27% in the first four months of the year, while their value in yuan dropped 10.4%. Overall, China’s exporters will maintain growth over the next few months, due to the moderate expansion of global demand, experts interviewed by the Herald said.

Investors should pay attention to risk and not blindly follow the rally in gold, said Guo Liyan, deputy director of the Institute of Economics at the Chinese Academy of Macroeconomics. He told Yicai bulk commodities will not always rise, while other experts said buyers need to behave rationally and protect themselves from volatility. China’s demand for gold was supported by yuan weakness and concerns over real estate and stock market fluctuations, said Wang Lixin, CEO of the World Gold Council China.

The development index of small and medium-sized enterprises rose by 0.1 points to 89.4 in April, rebounding for two consecutive months, but remaining below the prosperity threshold of 100. The index, however, was higher than the same period in 2022 and 2023, Securities Daily reported citing data by China Association of Small and Medium Enterprises. The increase in April was mainly driven by the recovery of the service sector. The sub-index of social service rose significantly by 0.5 points, while industry and real estate fell by 0.1 points, the newspaper said.