MNI China Daily Summary: Monday, March 29

EXCLUSIVE: China's yuan should strengthen moderately against the dollar by the end of the year, driven by capital inflows as the Federal Reserve keeps rates on hold to keep U.S. government borrowing costs low, a former high-ranking People's Bank of China official told MNI.

LIQUIDITY: The PBOC injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.2% on Monday. This keeps the liquidity unchanged after offsetting the maturity of CNY10 billion repos today, according to Wind Information. The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 2.1815% from 2.2192% on Friday, Wind Information showed. The overnight repo average rose to 1.7955% from the previous 1.7637%.

YUAN: The currency weakened to 6.5626 against the dollar from 6.5407 on Friday, hitting the weakest level since December 2020. The PBOC set the dollar-yuan central parity rate higher for a fourth day at 6.5416, compared with the 6.5376 set on Friday.

BONDS: The yield on 10-year China Government Bond was last at 3.2350%, down from Friday's 3.2400%, according to Wind Information.

STOCKS: The Shanghai Composite Index rose 0.50% to 3,435.30 while the CSI300 index gained 0.18% to 5,046.88. Hang Seng Index edged up 0.01% to 28,338.30.

FROM THE PRESS: China's credit rating industry is likely to see a round of mergers and acquisitions as the PBOC prepares a plan to overhaul for the industry following a few state firms' defaults, Yicai.com reported. Rating agencies are required to build a rating mechanism centered on default rates and track their ratings timely, according to the PBOC's draft posted on its website Sunday. Credit ratings in the Chinese bond market are often criticized for inaccuracies and lacking distinctions, the newspaper said.

China is cracking down on the misuse of loans for investment into the property market, with three ministries issuing statements to probe nationwide banking systems, the Xinhua News Agency's Economic Information Daily said. Investors have been channeling funds borrowed for normal business activities into the housing market, which pushed up levels of business and personal debt and heightened risks of a debt crisis, the newspaper said citing Dong Ximiao, an analyst with China Merchant Bank. Authorities are posting the names of businesses and individuals being punished into credit-rating systems to halt the illegal practice at its source, the Daily's report said.

Profits at China's industrial firms surged 179% in the first two months from a year ago to CNY1.11 trillion as manufacturing and demand regained pace, the National Bureau of Statistics said. This compared to the 38.3% decline in the same period last year, the beginning of the pandemic. More than 90% of industries saw profits increase in the first two months and nearly 60% doubled profits, led by equipment and high-tech manufacturing.

China and Europe must stay alert and not to fall into the "battlefield" laid by the U.S. to consolidate its hegemony using the Xinjiang issue as a flash point, the government-run Global Times said in an editorial. The U.S. intends to divide the world again and cause China to lose the strategic opportunity to open up to the world. Europe would then lose much of the Chinese market and follow the U.S. lead, the newspaper said. China hoped the tit-for-tat sanctions by China and the West stay symbolic and ideological, and do not cross into economic and trade areas, it said.