MNI China Daily Summary: Monday, April 18

POLICY: China will beef up supportive policies to help companies affected by Covid-related restrictions, guarantee energy and grain supply and stabilize industrial and supply chains to keep the economy performing within “an appropriate range,” Fu Linghui, a National Bureau of Statistics (NBS) spokesman said at a briefing on Monday.

POLICY: China's consumer prices may rise moderately in the next few months on higher costs of imported goods, supply shortages caused by the pandemic and the ongoing war in Ukraine, said Fu Linghui, the NBS spokesman. March CPI was 1.5% y/y, almost entirely due to the higher costs of vegetables and energy, according to Fu.

DATA: China's economy rebounded by 4.8% y/y in Q1 from 4.0% in the previous quarter, beating the median forecast of 4.3%, according to data by the NBS. Fixed-asset investment slowed to 9.3% y/y. Infrastructure investment rebounded to 8.5%, but property and manufacturing investment both slowed to 0.7% and 15.6%, respectively. Industrial production slowed to 5.0% in March from 7.5% y/y in the first two months, though beating the forecast of 4.5%.

LIQUIDITY: The People's Bank of China (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, 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) increased to 1.7921% from 1.7295% on Friday, Wind Information showed. The overnight repo average increased to 1.3818% from the previous 1.3444%.

YUAN: The currency strengthened to 6.3698 against the dollar from 6.3712 on Friday. The PBOC set the dollar-yuan central parity rate lower at 6.3763 on Monday, compared with 6.3896 on Friday.

BONDS: The yield on 10-year China Government Bond was last at 2.8500%, up from Friday's close of 2.7900%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.49% to 3,195.52 while the CSI300 index lost 0.53% to 4,166.38. Hang Seng Index increased 0.67% to 21,518.08.

FROM THE PRESS: China may still cut interest rates as it needs increased loosening policies and more credit to support growth, the 21 Century Business Herald said citing analyst Li Zhan of China Merchant Fund. China may cut the loan prime rate (LPR) on this Wednesday, and should the pandemic continue to impact the economy, the rate on medium-lending facilities (MLF) could be further lowered in Q2, Li was cited as saying. On Friday, the central bank cut RRR by 25 bp. While the move wasn't enough to change the market’s overall direction, it helps boost investors’ confidence, the newspaper said.

China is planning more coordinated policies to boost growth and counter downward economic pressures that have persisted since Q1, Vice Minister of Finance Liao Min said in a blog post by China Finance 40 Forum. China should avoid introducing policies that have significant contractionary effects, but will take more forceful measures to protect businesses and jobs and improve people’s living standards, Liao said. Financial authorities have introduced relevant policies to help logistics companies and workers deal with the pandemic, Liao said.

Shanghai has issued a list of companies allowed to accelerate their resumption of work and production, aiming to ensure the stability of the supply chain, especially in the auto and semiconductor sectors, the Securities Times reported. Companies though still face labor shortages and logistic difficulties as many communities have not officially lifted the lockdown, the newspaper said citing an unnamed source from a semiconductor manufacturer. The epidemic has impacted 395 A-share listed companies in Shanghai, the newspaper added.