MNI China Daily Summary: Monday, February 21

POLICY: China's central bank on Monday left its benchmark rates for loans unchanged, according to a statement on the People's Bank of China website. The move was largely expected by the market after the PBOC left unchanged another key policy rate last week. The Loan Prime Rate, guiding companies' cost of borrowing, remains at 3.70% for the one-year maturity and 4.60% for five years.

LIQUIDITY: The PBOC injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.1%. 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) rose to 2.1154% from 2.0910% on Friday, Wind Information showed. The overnight repo average increased to 2.1780% from the previous 2.1009%.

YUAN: The currency weakened to 6.3333 against the dollar from 6.3265 on Friday. The PBOC set the dollar-yuan central parity rate higher at 6.3401, compared with 6.3343 set on Friday.

BONDS: The yield on 10-year China Government Bond was last at 2.8500%, up from Friday's close of 2.8025%, according to Wind Information.

STOCKS: The Shanghai Composite Index closed unchanged at 3,490.61 while the CSI300 index edged down 0.36% to 4,634.31. Hang Seng Index lost 0.65% to 24,170.07.

FROM THE PRESS: The yuan, which traded near a four-year high against the dollar last week, may lose steam pressured by liquidity tightening measures outside China, a rising U.S. dollar index, and the narrowing China-U.S. interest spread, the China Securities Journal reported citing analysts. Support from exports and forex settlement could also be weakening, and the currency will again be close-related to the dollar index movement, the newspaper said. However, a strong inventory of the dollar inside China and businesses' demand to convert the dollar to yuan could help lessen the yuan's depreciation, the newspaper said. The Chinese currency surged past 6.33 last week.

The People’s Bank of China could make small cuts to the reserve requirement ratios in Q1 to achieve a desirable level of growth in credit and aggregate finance throughout the year, so as to meet the funding demand of expanded infrastructure investment, Lian Ping, the chief economist of Zhixin Investment Research Institute, wrote in an article published by news service Yicai.com. By Lian’s calculation, there could be about CNY1.3 trillion extra funds from local government special bonds to be invested in infrastructure projects this year when compared to 2021, which may create as much as CNY5.2 trillion social financing needs. Failing to meet these needs may reduce fiscal policy's pro-growth effect, Lian said.

China’s newest project to build eight national computing hubs and 10 data centers is expected to create over CNY400 billion yuan of investments each year, the China Securities Journal reported. The project aims to channel more computing resources from the country's eastern regions to less-developed western regions. This will better empower the development of the digital economy, as the demand for computing power is growing by more than 20% annually, the newspaper said.