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POLICY: China will further open its door to foreign investment, and all local authorities have pushed to overcome the impact of Covid-19 and attract investment, said Shu Jueting, Ministry of Commerce spokesperson at a briefing on Thursday. There were 185 large-scale foreign-funded projects each valued over USD100 million signed in the first four months, which is equivalent to an average of 1.5 projects coming to China every day, according to Shu.
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 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 1.5736% from 1.5581% on Wednesday, Wind Information showed. The overnight repo average fell to 1.3076% from the previous 1.3189%.
YUAN: The currency weakened to 6.7900 against the dollar from 6.7274 on Wednesday. The PBOC set the dollar-yuan central parity rate higher at 6.7292, compared with 6.7290 set on Wednesday.
BONDS: The yield on 10-year China Government Bond was last at 2.8025%, down from the previous close of 2.8225%, according to Wind Information.
STOCKS: The Shanghai Composite Index edged down 0.12% to 3,054.99, while the CSI300 index decreased 0.44% to 3,958.74. Hang Seng Index tumbled 2.24% to 19,380.34.
FROM THE PRESS: China’s fiscal and monetary policies should prioritize stabilising employment using tax rebates, deferred payments of social security contributions and a reduction of financing costs, Yicai.com reported citing the State Council’s executive meeting late on Wednesday. The policy intensity should be no less than that in 2020 to prevent unemployment risks, the newspaper said citing Zhang Chenggang, professor at Capital University of Economics and Business. There is a record 10.76 million people coming into the job market this year. Small and medium-sized enterprises which make the largest contribution to employment, are under stress from the pandemic, the newspaper said citing Yao Kai, professor at Fudan University.
The benchmark Loan Prime Rate is expected to fall by five basis points in May, as banks’ borrowing costs were guided down after the deposit interest rate reform, the Securities Daily reported citing analysts. Recently, large banks are encouraged to lower their high-level provision ratios, which also helps to drive down their debt costs, the newspaper said citing analysts. The 25 bps cut to banks’ reserve requirement ratios in April also helped, the newspaper added. The LPR quotation is set to be released on May 20.
China still has fiscal policy space and tools to offset increased economic downward pressure, and it is unlikely to issue special treasury bonds in the rest of the year, Securities Times reported citing analysts. Choosing to issue such bonds will instead disrupt market expectations and feed through fiscal debt risks, the newspaper said citing Wu Chaoming, vice president of Chasing Institute. Though the budget deficit-to-GDP ratio was set as 2.8% earlier this year, the actual fiscal strength is sufficient and equivalent to a deficit ratio of 3.8% when taking into account profit turnover by SOEs, and the excess balance of last year, the newspaper said citing Zhang Yu, chief analyst of Huachuang Securities.
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