MNI China Daily Summary: Monday, April 19

EXCLUSIVE: China will monitor the impact of factory gate inflation on consumer prices before resorting to monetary policy action but as an interim measure it may ask some commodity companies to raise output, advisors and market analysts told MNI.

POLICY: China's CPI will show a moderate gain but still fall within the government's 3% ceiling this year as the transmission of overseas inflation is limited and controllable, said Meng Wei, spokeswoman of the National Development and Reform Commission at a briefing on Monday.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.2%. This leaves liquidity unchanged given the maturity of CNY10 billion reverse 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) rose to 2.2167% from 2.1676% on Friday, Wind Information showed. The overnight repo average increased to 2.0752% from the previous 1.9299%.

YUAN: The currency strengthened to 6.5115 against the dollar from 6.5228 on Friday, hitting the weakest level since December 2020. The PBOC set the dollar-yuan central parity rate lower for a fifth day at 6.5233, compared with the 6.5388 set on Friday.

BONDS: The yield on 10-year China Government Bond was last at 3.2025%, down from Friday's 3.2100%, according to Wind Information.

STOCKS: The Shanghai Composite Index rallied 1.49% to 3,477.55 while the CSI300 index jumped 2.43% to 5,087.02. Hang Seng Index edged up 0.47% to 29,106.15.

FROM THE PRESS: China's digital currency is not designed to challenge the U.S. dollar's global dominance, PBOC Deputy Governor Li Bo said at the Boao Forum as reported by the Securities Times. The PBOC will widen the digital currency's domestic use while promoting the Chinese currency's internationalization, said Li. The PBOC needs to improve the regulatory frameworks for the digital currency before an official launch can be decided, Li told the Forum. The PBOC is also probing Bitcoin and other cryptocurrencies to gauge the financial risks, Li said.

China should proactively advance the Paris Agreement and prevent the U.S. from using its leadership to damage the interests of China, the Global Times said following an agreement between China and the U.S to jointly tackle the climate crisis. China should prevent western countries from monopolizing the climate change issue at the expense of China and other developing countries, it said. The U.S. creates diplomatic obstructions for China and Russia even as it seeks cooperation on climate, the newspaper said. The deterioration of the international environment is self-evident, with the U.S. overtly trying to contain China, it said.

Japanese Prime Minister Yoshihide Suga has further strained relations with China by displaying an alliance with the U.S. to contain China in his meeting with President Joseph Biden last week, the official China Daily said in an editorial. Japan had already soured relations through its decision to discharge the nuclear wastewater from the Fukushima nuclear plant into the Pacific, it said. However, Suga's words were weaker than expected given his likely intention to strike a balance with Japan's economic ties with China, the Daily said.