MNI China Daily Summary: Monday, February 27

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY336 billion of operations via 7-day reverse repos, with the rates unchanged at 2.00%. The operation led to a net injection of CNY66 billion after offsetting the maturity of CNY270 billion reverse repos today, according to Wind Information. The operation aims to keep banking system liquidity stable towards the end of month, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 2.2946% from 2.2584% on Friday, Wind Information showed. The overnight repo average was up to 1.8317% from the previous 1.4396%.

YUAN: The currency weakened to 6.9645 against the dollar from 6.9442 on Friday. The PBOC set the dollar-yuan central parity rate higher at 6.9572, compared with 6.8942 set on Friday.

BONDS: The yield on 10-year China Government Bond was last at 2.9175%, down from Friday's close of 2.9190%, according to Wind Information.

STOCKS: The Shanghai Composite Index decreased 0.28% to 3,258.03, while the CSI300 index was down 0.42% to 4,042.84. The Hang Seng Index edged down 0.33% to 19,943.51.

FROM THE PRESS: China’s pension coverage faces tough challenges due to inadequate coverage for its large and aging population, Zhou Xiaochuan, Former People’s Bank of China (PBOC) governor, said in a recent speech. Speaking at the Global Wealth Management Forum, Zhou noted China’s pre-funded pension funds amounted to less than 10% of GDP compared to some countries at 50% to 100%. The issue could be addressed by reforms to the income tax system, increasing incentives for joint enterprise/employee contribution schemes, and potentially converting equity of state-owned companies into pension funds.

Financing channels for real estate leasing companies will be widened to increase the amount of bonds being issued, according to draft proposals released by the People's Bank of China and the China Banking and Insurance Regulatory Commission. The measures will broaden the financing channels by allowing firms to raise capital via a variety of innovative financial tools that suits the large scale and long payback characteristics of the industry. The proposal will allow firms to use mortgages on their balance sheet as a credit enhancement to issue guaranteed bonds.

The economy will rebound in 2023 as epidemic prevention is relaxed and consumption improves, according to the PBOC. In its Q4 2022 monetary report, the central bank said this year's monetary policy should be precise and strong, and not only focus on supporting the expansion of domestic demand, but also take into account longer term economic growth and price stability. Authorities will adhere to a managed floating exchange rate system based on market supply and demand, and guide funds into areas such as inclusive finance, technological innovation, and green development, the report said.