MNI China Daily Summary: Wednesday, March 13

EXCLUSIVE: China plans to invest hundreds of billions of yuan in building up the world’s largest free-trade port in Southeast Hainan by 2025 and aims to pay for much of it with local government bond sales at home and abroad, a high-ranking provincial official told MNI, adding that authorities will closely monitor the use of the funds as risk management is now being prioritised over stimulating GDP growth.

EXCLUSIVE: China will use Hainan as a testing ground for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) trade rules before it considers rolling them out across the country, the head of the province’s fiscal department told MNI.

POLICY: China's macro policymakers will continue to strengthen counter-cycle efforts this year to support investment as weak external demand drags down exports, a prominent policy advisor said in a forum.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY3 billion via 7-day reverse repo on Wednesday, with the rates unchanged at 1.80%. The reverse repo operation has led to a net drain of CNY7 billon after offsetting CNY10 billion maturity today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.8965% from 1.8696%, Wind Information showed. The overnight repo average increased to 1.7391% from 1.7227%.

YUAN: The currency weakened to 7.1945 to the dollar from 7.1743 on Tuesday. The PBOC set the dollar-yuan central parity rate lower at 7.0930, compared with 7.0963 set on Tuesday. The fixing was estimated at 7.1769 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.4200%, down from Tuesday's close of 2.4350%, according to Wind Information.

STOCKS: The Shanghai Composite Index decreased 0.40% to 3,043.83 while the CSI300 index fell 0.70% to 3,572.36. The Hang Seng Index decreased 0.07% at 17,082.11.

FROM THE PRESS: The People’s Bank of China will likely cut the reserve requirement ratio and the medium-term lending facility rate in Q2, said Wang Qing, chief macro analyst at Golden Crediting Rating. PBOC Governor Pan Gongsheng signaled further RRR cuts last week after pointing out the current 7% average. Lian Ping, chairman of the China Chief Economist Forum said the PBOC may further increase pledged supplementary loans to meet the funding needs of the “three major projects” including affordable housing. The expanded use of structural tools will also bring about aggregate expansion, Lian added. (Source: Economic Information Daily)

Foreign investor sentiment over the A-share market has turned positive amid continued improvement of economic fundamentals, Economic Information Daily reported citing analysts. As of Tuesday, the net purchase amount of northbound funds this year reached CNY52.3 billion, exceeding the CNY43.7 billion for the whole of 2023, according to Wind Information. The moderate support from credit and fiscal policy, without flood-like stimulus, remains market positive, analysts said. Last year’s pessimistic expectation for the economy was fully priced, and the market was sensitive to the marginal improvements starting this year, the analysts added.

Policymakers should expand support of new productive forces to include new types of business models and demand behaviours, according to Liu Zhongfan, member of the Standing Committee of the CPPCC National Committee. Liu said developing new productive forces will need institutional reforms to enhance integration between the science and innovation sector with the wider economy and industry. Officials need to protect the intellectual property value of researchers, Liu added. (Source: 21st Century Business Herald)