MNI China Daily Summary: Tuesday, May 09

EXCLUSIVE: The Chinese economy faces potential headwinds in H2 2023 as a consumption rebound stalls and weak demand drags down manufacturing, while legacy, pre-pandemic structural challenges persist, economists and advisors told MNI.

POLICY: China's exports eased from April's eight-month high, while imports dipped further on falling commodity prices, data released by China Customs showed.

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 a net injection of CNY2 billion as no reverse repos matures 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 1.8174% from 1.7955%, Wind Information showed. The overnight repo average decreased to 1.2342% from 1.3940%.

YUAN: The currency weakened to 6.9275 against the dollar from 6.9166. The PBOC set the dollar-yuan central parity rate higher at 6.9255 on Tuesday, compared with 6.9158 set on Monday.

BONDS: The yield on 10-year China Government Bonds was last at 2.7825%, down from Monday's close of 2.7900, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 1.10% to 3,357.67, while the CSI300 fell 0.86% to 4,027.88. The Hang Seng Index was down 2.12% to 19,867.58.

FROM THE PRESS: China will overhaul real-estate brokerage fee rules for second-hand housing purchases, aimed at lowering cost and increasing demand, according to the Ministry of Housing and Urban Rural Development. Under the new guidelines, transaction parties will negotiate the brokerage fees based on service quality and market conditions, with buyers not required to pay the previous 2.7% industry standard. The ministry said brokerage firms should reasonably reduce fees and introduce a tiered pricing system with the costs shared between buyer and seller. One analyst said the government has to ensure the new rules are successfully implemented in order to become industry consensus. (Source: 21st Century Herald)

While sentiment among Chinese chief economists declined slightly in April, they still expected the economy to continue recovering steadily, according to Yicai. The Yicai Confidence Index of Chief Economists for April was 51.2, down from 51.6 in March, the news outlet said. Economists forecasted April CPI at 0.41%, PPI at -3.28% and retail sales up by 21.69%. Participants' expectation for the average yuan/dollar rate in 2023 weakened from 6.65 to 6.68. One analyst said the economy faces downside risks with support needed to boost income growth and employment prospects to sustain domestic demand. Economists expect monetary policy to remain loose, with the possibility of lowering the policy interest rates as low.

China must raise the level of social welfare to reduce the cost of children and boost births and address the declining population, according to an editorial by Yicai. The news outlet said the government must also focus on developing the existing population, which will lead to more high-quality growth and Chinese modernisation. The country’s transition to a domestic consumption and demand growth model depends on addressing demographic quantity and quality issues, Yicai said.