MNI China Daily Summary: Thursday, May 18

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY2 billion via 7-day reverse repos, with the rates unchanged at 2.00%. The operation has led to an unchanged liquidity after offsetting the maturity of CNY2 billion reverse repo 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) decreased to 1.7730% from 1.8557%, Wind Information showed. The overnight repo average decreased to 1.4443% from the previous 1.5108%.

YUAN: The currency weakened to 7.0294 against the dollar from 6.9985 on Wednesday. The PBOC set the dollar-yuan central parity rate higher at 6.9867, compared with 6.9748 set on Wednesday.

BONDS: The yield on 10-year China Government Bonds was last at 2.7775%, up from Wednesday's close of 2.7691%, according to Wind Information.

STOCKS: The Shanghai Composite Index closed up 0.40% at 3,297.32, while the CSI300 index decreased 0.10% to 3,956.07. The Hang Seng Index was up 0.85% to 19,727.25.

FROM THE PRESS: Shanghai unveiled a package of policies aimed at the high-quality development of the city's SMEs, according to Wu Jincheng, director of the Shanghai Economic and Information Technology Commission. Speaking at a press conference, Wu said more small tech and innovative firms would receive rewards and subsidies as the thresholds for existing support would be lowered. SMEs involved in green transition industries would benefit from a new R&D funding programme and the government would induct 200 high-level SME professionals into a new training scheme. The government would also increase its share of procurement sourcing from SMEs to over 40% by the end of 2023, Wu said. (Source: Yicai)

China’s two- and three-tier cities need further measures to boost confidence in the housing market, as prices decline in April, according to analysts interviewed by the Securities Daily. One analyst noted April’s data showed first-tier cities had maintained upward momentum from Q1, but second- and third-tier cities had slowed. Prices of new builds in tier-one cities increased by 2% y/y, a 0.3pp m/m gain, while second-hand properties were up 0.9% y/y, down 0.2pp m/m. Prices in some major tier-two cities increased, with Chongqing, Haikou and Wuhan all showing expansion for new builds, but declines for second-hand homes. Only Chengdu increased prices in both categories. (Source: Securities Daily)

China’s foreign exchange and financial sector should prioritise support for tech and innovation firms to achieve high-quality development, according to Pan Gongsheng, head of State Administration of Foreign Exchange (SAFE). Speaking on a recent tour of Beijing’s tech development zone, Pan said SAFE aimed to support firms to become “bigger and better” through integrating investment and financing models with the international market, and improve efficiency for cross border financing and fund management. Jin Wei, vice mayor of Beijing also joined the tour. (Source: Yicai)