MNI China Daily Summary: Monday, April 1

DATA: China's Caixin manufacturing PMI registered 51.1 in March, up 0.2 points from February, staying in the expansionary zone above the breakeven 50 mark for a fifth month and hitting the highest level since March 2023, driven by the rapid resumption of production following the Chinese New Year, the financial publisher said.

POLICY: China should accelerate high-tech investment and tighten equity market regulation as it bids to double national income and boost household disposable income, a prominent think tank said on Sunday. China should increase R&D investment to around 3% from 2.64% in 2023, Chongyang Institute for Financial Studies at Renmin University of China said in a research report, calling for more cooperation between government departments and reduced intervention in the economy.

POLICY: Chinese financial institutions should boost investments in renewable energy projects and support the transition of high-carbon sectors in countries along the Belt and Road Initiative, Ma Jun, former People’s Bank of China (PBOC) chief economist told a recent forum.

LIQUIDITY: The PBOC conducted CNY2 billion in 7-day reverse repso, with rates unchanged at 1.80%. The operation led to a net drain of CNY48 billion after offsetting CNY50 billion in maturities, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.8734% from 2.0124%, Wind Information showed. The overnight repo average increased to 1.7204% from 1.7093%.

YUAN: The currency weakened to 7.2293 against the dollar from 7.2196 on Friday. The PBOC set the dollar-yuan central parity rate lower at 7.0938, compared with 7.0950 on Friday. The fixing was estimated at 7.2196 by a Bloomberg survey today.

BONDS: The yield on 10-year China Government Bond was last at 2.3080%, up from the previous close of 2.2900%, according to Wind Information.

STOCKS: The Shanghai Composite Index rose 1.19% to 3,077.38 while the CSI300 index gained 1.64% to 3,595.65. The Hang Seng Index added 0.91% to 16,541.42.

FROM THE PRESS: China has expressed strong opposition to the U.S.’s latest revision of semiconductor export controls which came less than six months since it introduced the rule, according to a statement on the Ministry of Commerce website late on Sunday. Washington has set more obstacles to China-U.S. trade by increasing the compliance burden, the ministry said, emphasising that the industry is highly globalised and calling for a predictable business climate. China, as the world’s largest semiconductor market, will strengthen cooperation to promote supply chain stability, it said.

China’s manufacturing PMI of 50.8 in March showed the economy has made marginal improvements after rising above the 50 mark for the first time in six months, according to Wen Tao, analyst at the China Logistics Information Centre. The economy benefited from the gradual implementation of macro policies, increasing confidence and stabilising foreign trade, Wen added. Cai Jin, vice president of the China Federation of Logistics and Purchasing, said corporate sentiment was improving following a good spring festival, with the non-manufacturing business activity expectation index rising to 58.0, with strong rises from construction and services.

China’s Q1 GDP is expected to grow around 5%, according to chief economists interviewed by Securities Daily. The economy has seen consumption, investment, and exports all perform better during Jan-Feb than in the same period last year, which indicates Q1 growth of slightly over 5%, according to Chen Li, chief economist of China International Finance Securities. Zhao Wei, chief economist of Sinolink Securities, believes Q2 fixed asset investment will increase as authorities step up fiscal intensity and accelerate the implementation of ultra-long-term special treasury bonds.