MNI China Daily Summary: Thursday, May 5

LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.10% on Thursday. The operation has led to a net drain of CNY40 billion after offsetting the maturity of CNY50 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) decreased to 1.8454% from 2.0053% on April 29, the last working day before the May Day holiday, Wind Information showed. The overnight repo average fell to 1.7391% from the previous 1.7882%.

YUAN: The currency weakened to 6.6224 against the dollar from 6.5866 on Wednesday. The PBOC set the dollar-yuan central parity rate lower at 6.5672 on Thursday, compared with 6.6177 set on April 29.

BONDS: The yield on 10-year China Government Bond was last at 2.8500%, down from the previous close of 2.8575%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.68% to 3,067.76, while the CSI300 index decreased 0.15% to 4,010.21. Hang Seng Index fell 0.36% to 20,793.40.

FROM THE PRESS: China should increase policy intensity to stabilise economic growth, such as new re-lending tools, consumption stimulus, and subsidies for low- and middle-income groups affected by the pandemic, Yicai.com reported citing analysts. China can issue special treasury bonds, which can help to fund infrastructure projects as well as subsidise lower-income groups and smaller businesses with rent, labor costs and interest payments, the newspaper said citing Luo Zhiheng, chief economist of Yuekai Securities. The Politburo meeting in end-April called for new incremental policy tools as well as the accelerated implementation of pro-growth policies announced earlier, the newspaper said.

China’s consumer price index will rebound above 2% with sharp price hikes in fruit, vegetables and eggs as logistics are constrained amid Covid lockdowns, the Economic Information Daily reported citing analysts. Domestic fuel costs have followed the declines in international oil prices as the Russia-Ukraine conflict has been basically priced in the market, the newspaper said. CPI will rise moderately in the following months as costs for goods remains high due to low upstream inventory and the tension in the supply chain, the newspaper cited analysts as saying. CPI rose 1.5% y/y in March.

Smaller cities in China will accelerate policies to stimulate housing demand, including removal of home purchase limits, easier loan rules and lower down payment ratios for second homes, the Securities Times reported citing Ding Zuyu, head of Shanghai E-House Real Estate Research Institute. Key big cities may moderately unbundle control policies but it is hard to give up their home purchase limits, the newspaper cited Ding as saying. Several second-tier cities including Wuxi and Xuzhou, have relaxed real estate market policies during the May Day holiday following a Politburo meeting in end-April that set the tone, the newspaper said.