MNI China Daily Summary: Monday, April 26

LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.2% on Monday. 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 2.2357% from 2.1767% on Sunday, Wind Information showed. The overnight repo average increased to 2.0456% from the previous 2.0159%.

YUAN: The currency strengthened to 6.4878 against the dollar from 6.4936 on Friday. The PBOC set the dollar-yuan central parity rate lower at 6.4913, compared with the 6.4934 set on Friday.

BONDS: The yield on 10-year China Government Bond was last at 3.2500%, up from Friday's 3.2250%, according to Wind Information.

STOCKS: The Shanghai Composite Index fell 0.95% to 3,441.17 while the CSI300 index lost 1.13% to 5,077.24. Hang Seng Index edged down 0.43% to 28,952.83.

FROM THE PRESS: The Chinese yuan is likely to trade at around 6.4-6.5 against the U.S. dollar this year, the Economic Information Daily reported citing a report by the Chinese Academy of Social Sciences. China's GDP may reach about 8% growth and policymakers should maintain policy continuity as well as prudently defuse financial risks including establishing "sustainable" model of debt growth, the newspaper said citing the Academy. Inflationary pressure will be moderate in 2021 and the macro leverage ratio may rise, the newspaper said.

China should consider subsidizing industries and provinces exposed to greater financial risks while pursuing carbon peak and neutrality goals, said Xu Zhong, deputy director of the National Association of Financial Market Institutional Investors and a former research head at the PBOC. In the long run, an auction mechanism should be established to facilitate the trading of carbon allowances and auction proceeds can subsidize risky areas to prevent systemic risks, Xu said in a blog post published by the China Finance 40 Forum. Green policy measures should be included in the monetary policy framework, as they may cause price hikes of some commodities and impact the potential growth rate, said Xu.

China's five major banks should increase lending to SMEs by more than 30% this year, according to a website statement released on Sunday by the China Banking and Insurance Regulatory Commission. Banks should ensure these micro loans match the rate of growth of other loans and that lending rates be stable at 2020 levels, the regulator said. Large banks should strive to achieve a higher number of new SME clients than last year and include the proportion of "first-lenders" in their internal performance indicators, the regulator said.