MNI China Daily Summary: Friday, May 19

EXCLUSIVE: China’s reference lending rate will likely remain unchanged this month, with banks having already cut loan rates under central bank guidance, and despite calls for a cut to boost credit demand and support economic recovery, policy advisors and economists told MNI.

BRIEF: China's foreign exchange regulators will crack down on pro-cyclical and one-way bets on the yuan when necessary and curb speculation to prevent excessive volatility, the People’s Bank of China said in a statement on its website.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY2 billion via 7-day reverse repos, with the rates unchanged at 2.00%. The operation has led to an unchanged liquidity after offsetting the maturity of CNY2 billion reverse repo today, according to Wind Information. The operation aims to keep banking system liquidity reasonable and ample, the PBOC said on its website.

RATES: China's seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.8743% from 1.7730%, Wind Information showed. The overnight repo average decreased to 1.4035% from the previous 1.4443%.

YUAN: The currency weakened to 7.0356 against the dollar from 7.0294 on Thursday. The PBOC set the dollar-yuan central parity rate higher at 7.0356, compared with 6.9967 set on Thursday (first time above 7 since Dec 5, 2022）。

BONDS: The yield on 10-year China Government Bonds was last at 2.7715%, down from Thursday's close of 2.7775, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.42% to 3,283.54 while the CSI300 index fell 0.29% to 3,944.54. The Hang Seng Index was down 1.40% to 19,450.57.

FROM THE PRESS: Government policy will prioritise enhancing confidence in the economic recovery, with more targeted measures to expand domestic demand, according to Li Qiang, China’s Premier. Speaking on a recent tour of Shandong province, Li said the government could boost domestic demand through high-quality supply and establishing more consumption hotspots. He emphasised rural areas needed policy support to increase use of electric vehicles, with more purchase subsidies and charging stations. China’s high quality growth was dependent on developing advanced manufacturing clusters and upgrading traditional industries, he said. (Source: Yicai)

China has officially opened its new financial super regulator the National Administration of Financial Regulation (NAFR), according to the Securities Daily. Analysts interviewed said authorities can use the NAFR to deepen financial reforms and coordinate macro-control, and supervision. Regulators are now better equipped to supervise fast evolving financial technology and the digital economy, as well as protect consumer rights, the news outlet said. The NAFR will overcome the previous issue of fragmented supervision that led to regulatory vacuums and serve the real economy by eliminating regulatory arbitrage. Vice Premier He Lifeng attended the opening ceremony.

Manufacturing in China needs more policy support to overcome challenges from slowing exports, low profits and investment, according to an editorial from Yicai. Authorities should prioritise the creation of manufacturing clusters and encourage private investors to invest more by combining investment with public funds. Newer industries such as electric vehicles and solar panels have performed well this year, but more focus is needed on upgrading traditional industries, the paper said. The sector has faced challenges from low-tech labour intensive firms, who have been unwilling to expand investment this year.