MNI China Daily Summary: Monday, March 6

EXCLUSIVE: The conservative 2023 growth target and stimulus unveiled at China’s National People’s Congress underscored the challenges confronting Beijing in its drive to deliver a recovery amid sluggish domestic demand, softer exports, a weak property market and high local government debt, policy advisers and economists told MNI.

POLICY: Foreign investors are welcome to play a greater role in China’s new pattern of development and dual circulation model, according to an NDRC spokesperson.

POLICY: China’s 2023 national growth target of around 5% can allow for high quality development and the construction of a new development pattern, said an NDRC spokesperson.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY7 billion of operations via 7-day reverse repos, with the rates unchanged at 2.00%. The operation led to a net drain of CNY329 billion after offsetting the maturity of CNY336 billion reverse repos today, according to Wind Information. The operation aims to keep banking system liquidity reasonable and ample, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) dropped to 1.8253% from 1.9245% on Friday, Wind Information showed. The overnight repo average fell to 1.2274% from the previous 1.2602%.

YUAN: The currency weakened to 6.9194 against the dollar from 6.9002 on Friday. The PBOC set the dollar-yuan central parity rate lower at 6.8956, compared with 6.9117 set on Friday.

BONDS: The yield on 10-year China Government Bond was last at 2.9025%, down from Friday's close of 2.9250%, according to Wind Information.

STOCKS: The Shanghai Composite Index down 0.19% to 3,322.03, while the CSI300 index dropped 0.52% to 4,109.01. The Hang Seng Index edged up 0.17% to 20,603.19.

FROM THE PRESS: About 50% of the special bonds will be invested in "traditional infrastructure" such as transportation and industrial parks, which leaves room for funding investment in the digital economy and smart cities, according to Securities Daily. Citing experts, the paper said February's issuance of local government bonds was up 13% y/y, with new bond issuance for 2023 expected to rise slightly compared with that in 2022. It was still necessary to maintain fiscal intensity this year, as investment was an important pillar in China’s troika of economic engines. According to the paper, the focus should be on ensuring the profitability of projects chosen for funding.

Legal reforms are needed to boost the private business sector, as the 14th National People's Congress emphasised the importance of the non-public sector by ensuring all types of ownership have equal legal treatment, according to Yicai.com. The paper said it was necessary to avoid a disconnection between macro policy and “micro-regulation”, with some places having a unilateral approach to the development of the private economy. Punishment for private firms should be in accordance with the law. Companies should not be closed down at will. Legislative changes were needed to strengthen property rights and protection systems for private enterprises and entrepreneurs, the paper said.

Beijing’s growth target of around 5% demonstrates a rational and pragmatic development approach, and still shows China remains the main driver of world growth this year, with other major economies set to grow at a slower rate, according to an editorial by the nationalist Global Times. This year's growth target was not low, with 5% growth equal to the entire GDP of most countries, the paper said. The government has experience in accomplishing major tasks and has proven ability in using different policy tools to achieve macro level results. Additionally, this year's target is practical and allows for "various risks that future economic growth may face." The change in leadership at this year’s two sessions will open up a new chapter, and not see a policy U-turn, according to the paper.