MNI China Daily Summary: Monday, May 9

DATA: China's foreign trade slowed in April with exports growing 3.9% - the slowest since June 2020 - led by shutdowns of factories in southeastern cities caused by lockdowns curbing the spread of Covid-19, while imports were flat due to a high base effect comparison to last year, data from China Customs showed on Monday. China's exports in the first four months were up 12.5% compared with a year ago. Imports grew 7.1% y/y in the same period, leading to an overall trade surplus of $212.93 billion.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rates unchanged at 2.10%. The operation has led to a net injection of CNY10 billion as no reverse repos maturing 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) increased to 1.6499% from 1.5509% on Friday, Wind Information showed. The overnight repo average rose to 1.3031% from the previous 1.2887%.

YUAN: The currency weakened to 6.7202 against the dollar from 6.6945 on Friday. The PBOC set the dollar-yuan central parity rate higher at 6.6899, compared with 6.6332 set on Friday.

BONDS: The yield on 10-year China Government Bond was last at 2.8425%, down from Friday's close of 2.8562%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.09% to 3,004.14 while the CSI300 index edged down 0.80% to 3,877.44. Hang Seng Index tumbled 3.81% to 20,001.96.

FROM THE PRESS: The yuan may continue to weaken with the narrowing of interest spreads between China and foreign countries and volatility of cross-border capital flows, though it is unlikely to depreciate significantly as forex regulators have sufficient tools to keep it at a reasonable level, the China Securities Journal reported citing analysts. The central bank is expected to maintain yuan flexibility and promote the self-balancing of the forex market by adjusting supply and demand, the newspaper cited analysts as saying. The Journal noted that introducing counter-cyclical factors in the CNY central parity rate, adjusting the risk reserve ratio for forward forex sales as well as the liquidity of offshore yuan trade are options.

The PBOC will soon launch a CNY100 billion re-lending programme to support transport, logistics and warehousing finance to smoothen the impact of pandemic curb measures, according to an article by the research wing of the PBOC’s Monetary Policy Committee published on a WeChat blog. Re-lending and re-discounts will be used to strengthen wholesale and retail sectors, hotels and catering and tourism with targeted tools to inject liquidity and boost credit, the article said. By end-March, the national re-lending and re-discount balance reached CNY2.47 trillion, according to the article.

China will strengthen macro policy to stabilise economic growth with expansionary plans in boosting infrastructure investment and consumption as well as targeted monetary tools likely to be introduced, the Economic Information Daily reported citing Zhong Zhengsheng, chief economist of Ping An Securities. Local authorities are striving to stabilise Q2 GDP growth, mainly by ensuring major projects are kicked off as early as possible as well as increasing the security and stability of supply chains, the newspaper said.