MNI China Daily Summary: Wednesday, May 31:

MNI: China’s interbank market liquidity tightened in April but remained ample, as the People’s Bank of China (PBOC) moved to stabilise conditions following Q1’s fast expansion, and firms withdrew funds to meet tax deadlines. Local traders reported economic sentiment falling as Q1 data showed an uneven recovery and weak consumer prices, the latest MNI China Liquidity Survey showed.

POLICY: China's Purchasing Managers' Index contracted for the fourth consecutive month, registering 48.8 in May, driven by a slowdown from production and consumption, data from the National Bureau of Statistics (NBS) showed.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY13 billion via 7-day reverse repos, with the rates unchanged at 2.00%. The operation has led to a net injection of CNY11 billion after offsetting the maturity of CNY2 billion reverse repo today, according to Wind Information. The operation aims to keep banking system liquidity stable at the end of month, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 2.0845% from 2.0650%, Wind Information showed. The overnight repo average decreased to 1.7003% from the previous 1.2803%.

YUAN: The currency weakened to 7.1065 against the dollar from 7.0901. The PBOC set the dollar-yuan central parity rate higher at 7.0821, compared with 7.0818 set on Tuesday.

BONDS: The yield on 10-year China Government Bonds was last at 2.7550%, down from Tuesday's close of 2.7600%, according to Wind Information.

STOCKS: The Shanghai Composite Index fell 0.61% to 3,204.56 while the CSI300 index decreased 1.02% to 3,798.54. The Hang Seng Index was down 1.94% to 18,234.27.

FROM THE PRESS:

The Shanghai Government has given policy support to boost private investment, an important part of China’s economy, according to Gu Jun, deputy secretary-general at the Shanghai Municipal Government. Gu said private investors will benefit from improved market access, as the government breaks down invisible barriers and creates a level playing field. Government procurement departments will seek to source 40% from private SMEs and no longer require firms to use cash deposits as insurance for project completion. The Shanghai Government will offer other support such as tax benefits, reduced land acquisition cost and lower utility bills. (Source: Yicai)

China’s capital markets have recently underperformed due to the weak economic rebound and a slowing real estate market, which has put a strain on company profits and cash flows, according to an editorial by Yicai. Authorities should encourage more M&A and consolidation activity to repair firms' balance sheets, and strengthen the asset valuation industry, and price mechanisms. Policymakers should focus on developing the asset management industry to better match risk appetites between investors and fund managers. (Source: Yicai)

Beijing should prioritise the development of pension and medical services to support the rapidly ageing society, according to Zhang Shaobai, general manager at Chinese Life Pension Insurance Guizhou province. Zhang noted China’s society is experiencing the fastest rate of ageing in the world and needs support to adequately deal with the new challenge. Policymakers face a complex situation due to fast urbanisation and disparities between rural and urban areas. China’s elderly will benefit from holistic integration of policies and resources across state and private sector, Zhang said. (Source: 21st Century Herald)