MNI China Daily Summary: Thursday, March 21

POLICY: China’s central bank has sufficient policy space and a rich reserve of tools including room to cut the reserve requirement ratio, Xuan Changneng, deputy governor of the People’s Bank of China (PBOC) told reporters. The PBOC would have broader autonomy of interest rate operations when major economies adjust their monetary policy, Xuan added.

POLICY: China fiscal authorities will allocate a budget of CNY66.7 billion this year for employment subsidies and support the implementation of policies to promote jobs and entrepreneurship, Deputy Minister of Finance Liao Min told reporters. The government’s financing guarantees institutions will increase aid for labour-intensive enterprises, leveraging CNY1.3 trillion in new loans in 2024 and ensuring over 12 million job positions and the creation of over 600,000 jobs, Liao noted.

LIQUIDITY: The PBOC conducted CNY2 billion via 7-day reverse repo, with the rates unchanged at 1.80%. The operation has led to a net CNY1 billion after offsetting CNY3 billion maturity today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.8690% from 1.8655% on Wednesday, Wind Information showed. The overnight repo average increased to 1.7753% from the previous 1.7707%.

YUAN: The currency weakened to 7.1994 against the dollar from 7.1993 on Wednesday. The PBOC set the dollar-yuan central parity rate lower at 7.0942, compared with 7.0968 set on Wednesday. The fixing was estimated at 7.1810 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.2830%, down from Wednesday's close of 2.2860%, according to chinamoney.com.cn.

STOCKS: The Shanghai Composite Index edged down 0.08% to 3,077.11, while the CSI300 index was down 0.12% to 3,581.09. The Hang Seng Index rose 1.93% to 16,863.10.

FROM THE PRESS: The PBOC will likely lower the Medium-term Lending Facility rate and guide banks to lower deposit rates to promote the downward movement of the benchmark Loan Prime Rate, said Dong Ximiao, chief researcher at Merchants Union Consumer Finance. Though the March LPRs were kept unchanged this week, Dong believes the one-year and five-year maturities still have room for a 10 and 15 bp cut within the year, depending on changes in banks’ funding costs and the economic recovery process. It will be necessary to guide the nominal loan interest rate down quickly by cutting the policy interest rate to alleviate the upward pressure on the real-interest rate amid low inflation, said Wang Qing, chief macro analyst at Golden Credit Rating. (Source: 21st Century Business Herald)

Shanghai has launched a CNY100 billion interest discount program to encourage private investment in high-tech projects, Securities Daily reported. The municipal government encourages banks to increase credit supply to five major areas with preferential rates, namely new networks, new computing power, new data, new facilities, and new terminals. Included are projects of industrial Internet and facilities for blockchain, intelligent computing, and intelligent connected vehicles. (Source: Securities Daily)

China’s total electricity consumption was 1,531.6 billion kilowatt hours in the first two months, rising 11% y/y, People’s Daily reported citing the National Energy Administration. The power consumption in primary, secondary and tertiary industries grew by 11.1%, 9.7% and 15.7%. In southern provinces including Guangdong, Guangxi and Hainan, special equipment manufacturing, automobile manufacturing, computer communications and electronic equipment manufacturing all experienced double-digit growth in electricity consumption.