MNI China Daily Summary: Thursday, March 9

EXCLUSIVE: The People’s Bank of China (PBOC) could be “strongly tempted” to again use state-owned banks to weaken the yuan, disguising Beijing’s attempts to boost exports through a cheaper currency should the rebound in consumption and the property market falter, former U.S. Treasury economist Brad Setser told MNI.

EXCLUSIVE: China is likely to deliver growth above 6% as robust investment compensates for lackluster consumption struggling to return to pre-pandemic levels, with the uncertain outlook for external demand requiring policymakers to remain flexible in adding stimulus, a prominent economic adviser told MNI.

POLICY: China's Consumer Price Index rose 1.0% y/y in February, missing market expectations of a 1.9% y/y rise and lower than January's 2.1% y/y increase , data from the National Bureau of Statistics showed.

LIQUIDITY: PBOC conducted CNY3 billion of operations via 7-day reverse repos on Thursday, with the rates unchanged at 2.00%. The operation led to a net drain of CNY70 billion after offsetting the maturity of CNY73 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) increased to 1.9330% from 1.9200%, Wind Information showed. The overnight repo average decreased to 1.3805% from the previous 1.6200%.

YUAN: The currency strengthened to 6.9699 against the dollar from 6.9706 on Wednesday. The PBOC set the dollar-yuan central parity rate higher at 6.9666, compared with 6.9525 set on Wednesday.

BONDS: The yield on 10-year China Government Bonds was last at 2.8950%, down from Wednesday's close of 2.9015%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.22% to 3,276.09, while the CSI300 index fell 0.35% to 4,019.85. The Hang Seng Index was down 0.63% to 19,925.74.

FROM THE PRESS: The creation of a new financial regulator will help solve current problems in cross-supervision and fill regulatory gaps, according to the 21st Century Herald. The new framework announced at the Two Sessions, will optimise regulatory resources and be better placed to tackle systemic financial risks. Citing experts, the paper said the moves would provide better protection to investors and consumers, as well as standardise China's wealth management industry. Under the reforms, the People's Bank of China's dual-pillar framework of monetary policy and macro-control is also clearer, the paper said. The new watchdog, which will replace the existing banking regulator and absorb some responsibilities from the central bank and the securities regulator, will report directly to the State Council.

China’s financial industry is stepping up efforts to support the economy in 2023, which is a strong topic of focus at this year's National People’s Congress, according to the Securities Daily. The paper said commercial banks have been increasing support for SMEs, helping them maintain profit margins by reasonably reducing financing costs. The insurance industry is expanding personal pensions across the whole country, appropriately increasing the upper limit of investable allowances. The paper said state owned banks are providing preferential interest rates and consumer subsidies aimed at accelerating the recovery and boosting consumption.

China should implement reforms to improve its unified national market and to bolster confidence, according to an financial advisor interviewed at National People's Congress by Caixin. China’s unified market is still underdeveloped and adds significant costs for firms operating across different regions. Reforms were needed to improve the rule-of-law and standardise market mechanisms, and gradually establish the leading position of the Chinese market in the international market system. Improvements were needed to reduce segmentation caused by the dual structure of urban and rural areas, according to the advisor.