MNI China Daily Summary: Monday, April 03

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY2 billion via 7-day reverse repos on Monday, with the rates unchanged at 2.00%. The operation has led to a net drain of CNY253 billion after offsetting the maturity of CNY255 billion reverse repos today, according to Wind Information. The operation aims to keep banking system 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 1.8604% from 2.3877%, Wind Information showed. The overnight repo average decreased to 1.2973% from the previous 1.8125%.

YUAN: The currency weakened to 6.8905 against the dollar from 6.8713 on Friday. The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 6.8805 on Monday, compared with 6.8717 set on Friday.

BONDS: The yield on 10-year China Government Bonds was last at 2.8800%, up from Friday's close of 2.8750%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.72% to 3,296.40, while the CSI300 index increased 0.98% to 4,090.57. The Hang Seng Index was up 0.04% to 20,409.18.

FROM THE PRESS: GDP growth in China can exceed 7.0% y/y, as the low-base effect from last year and recovering aggregate demand leads to accelerated growth, according to several chief economists interviewed by the Securities Daily. However, the m/m growth trend should be of concern, as this could slow in Q2. The economists called for proactive fiscal policy to implement subsidies and concessions, and for monetary policy to reduce the cost of personal consumer credit, encouraging demand. One expert expects further cuts to the reserve requirement ratio later this year, but the possibility of a loan prime rate decrease was declining.

Universities are strengthening collaboration with companies to boost levels of graduate employment, with several large recruitment fares taking place over the spring period, according to the 21st Century Herald. Demand for graduates with skills in sales are in high demand this year and private firms are playing an important role alongside state-owned enterprises in stabilising employment. In order to adapt to changing economic and social developments, the education system also has increased training and attendance in science, engineering, agriculture and medicine, the paper said.

The sharp 22.9% y/y contraction in industrial profits during the first two months of the year shows policy support is needed to secure the economic recovery, according to Yicai. More targeted policies, as well as reserve requirement ratio cuts, are needed to reduce financing costs for private enterprises and help the real economy. Strong bank financial results reported recently, plus the high reported salary of bank employees, means financial firms can provide more favorable conditions to SMEs in order to boost the economy, Yicai noted.