MNI China Daily Summary: Thursday, April 1

EXCLUSIVE: China should add derivatives to its carbon trading market to improve liquidity and widen the pool of participants as it pushes to increase green investments and deter polluters, policy advisors told MNI. A national carbon trading market to be launched at the end of June has become a key part of the drive to cut emissions in coal-dependent China, which so far has focused on building wind and solar power infrastructure and steered clear of taxes or penalties to encourage the switch to green energy.

POLICY: China and the U.S. should resolve concerns through dialogues and negotiations on the basis of mutual respect as equals, Ministry of Commerce spokesman Gao Feng said Thursday, when asked to comment on U.S. official's saying China-U.S. talks were possible. On trade matters, Gao said China opposes unilateral tariff hikes and the economic and trade relation between the globe's two largest economies should be mutually beneficial. His comments came after the U.S. Trade Representative said the U.S. is not ready to lift tariffs on Chinese imports in the near future but might be open to trade talks with Beijing.

LIQUIDITY: The PBOC injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.2% on Thursday. 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.

DATA: The Caixin China PMI for March dropped 0.3 points to 50.6 from the previous month, the lowest level since May 2020 and indicating the expansion of the manufacturing industry has slowed further, according to publisher Caixin in an email announcement on Thursday. Caixin noted however that its PMI remained in the expansion zone above the breakeven 50.0 for the 11th consecutive month.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 2.1536% from the close of 2.2855% on Wednesday, Wind Information showed. The overnight repo average increased to 2.1312% from the previous 2.0945%.

YUAN: The currency weakened to 6.5739 against the dollar from 6.5566 on Wednesday. The PBOC set the dollar-yuan central parity rate lower at 6.5584, compared with the 6.5713 set on Wednesdy.

BONDS: The yield on the 10-year China Government Bond was last at 3.2350%, flat from Wednesday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index increased 0.71% to 3,466.33, while the CSI300 jumped 1.24% to 5,110.78. Hang Seng Index increased 1.97% to 28,938.74%.

FROM THE PRESS: China will cut taxes by over CNY550 billion to further support small and micro enterprises, individual businesses and advanced manufacturing, Xinhua News Agency said citing the State Council. Measures would include halving tax rates on small businesses' first CNY1 million of income and raising the threshold of VAT from CNY100,000 monthly sales to CNY150,000, the report said. The government will refund the incremental retention tax credit monthly to advanced manufacturing businesses, including those working in the transportation equipment, electrical machinery, instruments and meters, medicine, and chemical fiber sectors, Xinhua said.

The yuan exchange rate is likely to be stable in the long term despite losing 1.5% to the dollar in March, the PBOC-owned Financial News reported. The depreciation of the CNY is modest compared with the 2.3% rise in the USD Index, and the yuan has stayed strong against a basket of currencies, the newspaper said citing Zhou Maohua, an analyst with the China Everbright Bank Financial Market Department. The CNY exchange rate is predicted to show a two-way volatility pattern despite recent drastic fluctuations in the overseas market, Zhou said.

China should avoid withdrawing too soon from policies of fiscal and monetary easing, and should stay on a course of promoting economic growth rather than stabilizing leverage, said Yu Yongding, a researcher at the Chinese Academy of Social Sciences, according to a CF40 Forum blog post. The government has other measures to rein in asset prices other than pulling back easing, said Yu. Consumption is still lagging because people tend to increase savings in times of uncertainties, he said.

China must increase the rate of its vaccination to boost its defence against the Covid-19 virus or it would lose its early advantage and risk falling behind other nations in terms of group immunity, China Central Television reported citing Shao Yiming, an immunologist at the Chinese Center for Disease Control and Prevention. China administered 114 million doses of the vaccines in the week through March 30, and its goal is to vaccinate 10 million per day with production reaching 5 billion doses by the end of this year, Shao said.