MNI China Daily Summary: Tuesday, March 1

DATA: The China Purchasing Managers' Index (PMI) edged up to 50.2 in February from January's 50.1, remaining in the expansion zone above 50 for the fourth straight month, as manufacturing activities resumed well after the Spring Festival holiday, data from the National Bureau of Statistics on Tuesday showed.

DATA: Caixin China's manufacturing PMI for February rebounded 1.3 points on month to 50.4, moving above the breakeven 50 level, indicating improvement but still lower than the long-term average, financial publisher Caixin said.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY50 billion via 7-day reverse repos with the rate unchanged at 2.10%. The operation has led to a net drain of CNY50 billion after offsetting the maturity of CNY100 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) decreased to 1.9855% from the close of 2.2952% on Monday, Wind Information showed. The overnight repo average fell to 1.7718% from the previous 2.2418%.

YUAN: The currency weakened to 6.3127 against the dollar from Monday's close of 6.3111. The PBOC set the dollar-yuan central parity rate lower at 6.3014 on Tuesday, compared with 6.3222 set on Monday, marking the strongest parity since Apr 20, 2018.

BONDS: The yield on 10-year China Government Bonds was last at 2.8140%, up from Monday's close of 2.7875%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.77% to 3,488.83, while the CSI300 index gained 0.83% to 4,619.69. The Hong Kong's Hang Seng Index rose 0.21% to 22,761.71.

FROM THE PRESS: More institutional investors raise the short-term outlook of yuan against the U.S. dollar to around 6.25, or even above 6.2, with global risk aversion rising amid the Russia-Ukraine conflict, the 21st Century Business Herald reported. The onshore yuan hit a record intraday high of 6.3025 since May 2018 on Monday, the newspaper said. The yuan may continue to hit new highs with the help of safe-haven capital inflows should geopolitical risks keep escalating and global financing markets decline, as the market believes China’s central bank has more flexible monetary policy space to stabilize its economic growth amid rising global commodity prices and inflationary pressures, the newspaper said citing an unnamed market source.

China should ensure a more than 5% economic growth in 2022, and make sure its new GDP exceeds that of the U.S., so to cope with rising risks of global stagflation and geopolitical conflicts, wrote Xu Hongcai, deputy director of the Economic Policy Commission of the China Associate of Policy Science at a blog post. A marginally looser monetary policy is necessary for the short term, but more efforts should be made to unblock the transmission mechanism and improve the efficiency of the use of funds, said Xu. Xu noted the first-ever negative growth in M1 in January may indicate companies have turned their loan funds into long-term fixed deposits, and funds returned to the banking system instead of flowing to stock, real estate markets nor the real economy.

China has the ability and conditions to effectively respond to external shocks and domestic downward pressure, stabilizing the economy and inflation, and continue to be a bright spot in the global economy, said the People’s Bank of China in an article post on its social media account. The prudent monetary policy will be flexible on its intensity and focus, aiming to maintain stability before seeking progress as well as guide banks to vigorously expand credit issuance, optimize credit structure and promote lower financing costs, the statement said.