Free Trial

MNI CHINA LIQUIDITY INDEX: Index Tighter, Economy Outlook Down

(MNI) Beijing

MNI (BEIJING) - China’s interbank market liquidity tightened in April but remained ample, as the People’s Bank of China (PBOC) moved to stabilize conditions following Q1’s fast expansion, and firms withdrew funds to meet tax deadlines. At the same time local traders reported economic sentiment failing as Q1 economic data showed an uneven recovery and weak CPI print, the latest MNI China Liquidity Survey showed.

The MNI Liquidity Condition Index reached 51.3 in April, up from 37.5 last month, as 23.7% of local traders reported conditions tightened, but 55.3% saying unchanged from March's ample conditions.

The higher the index reading, the tighter liquidity.

“The market usually experiences liquidity turbulence in April due to tax deadlines,” a trader in Shanxi told MNI, who also said less tax cuts this year may have amplified the disturbance.

This month the PBOC said it would focus on stabilising credit supply after Q1’s rapid growth, whilst maintaining enough liquidity to consolidate the recovery momentum.

Interpreting the PBOC’s Q2 outlook, economists told MNI they expect more targeted measures after the initial phase of the recovery used a broader approach (SEE: MNI PBOC WATCH: LPR Rate Seen Held Steady - Bonds & Currency News | Market News)

The People’s Bank of China conducted CNY billion MLF170 in April, injecting CNY20 billion into the market after offsetting the maturity of CNY150 billion MLF. The PBOC drained net CNY633 billion via its open market operation as of April 25, MNI calculated.

The MNI PBOC Policy Bias Index showed 78.9% of the traders believed policy stance would be maintained going forwards.


The MNI Economy Condition Index remained positive at 68.4 was down from 75.0 and 78.4 seen in March and February. China’s Q1 GDP equalled MNI’s forecasted growth of 4.5%, according to official data released last week. (SEE: MNI BRIEF: China GDP Up 4.5% Y/Y In Q1 - Bonds & Currency News | Market News

“The service sector has recovered quickly, but industrial recovery, fixed asset investment and unemployment remains soft,” a trader in Henan said.

March’s subdued CPI data also raised concerns. “We expected stronger CPI print in Q1, but the actual print was soft, coupled with low industrial operating rates this could reflect deeper problems,” a Fujian based trader told MNI.

China's Consumer Price Index rose 0.7% y/y in March, slower than February’s 1%.

Looking forwards, policy experts told MNI authorities should adopt a flexible approach given the rebound was not secure (SEE: MNI PBOC WATCH: Policy Rate Stable, Property Market On Watch - Bonds & Currency News | Market News)

For Q1 China’s retail sales increased 10.6%, fixed-asset investment was up 5.1%, and exports went up 8.4%. However, youth unemployment remained high at 19.6%, industrial production increased 3.0%, and private investment went up 0.6%.


MNI’s 7-Day Repo Rate Index was 63.2 in April, following previous 63.9, with 52.6% of participants seeing the rate curve climb in the next two weeks.

“Rates will increase as tax payments this month cause turbulence, as well as huge maturity of reverse repos,” said a Shandong based trader.

MNI’s 10-year CGB Yield Index was 53.9, down from 61.1 , with 23.7% seeing a slide of the curve following lower-than-expected CPI and PPI data, while 31.6% traders expected yields to rise.


Analysts raised concerns about deflation following March’s lower-than-expected CPI, therefore MNI asked local traders “Do you think the current economy is experiencing deflation?”, with 73.7% saying no and 15.8% yes with the remainder uncertain.

“CPI fluctuations are normal – the current low print is mainly driven by increasing supply,” a Shanghai based trader said.

The MNI survey collected the opinions of 38 traders with financial institutions operating in China's interbank market, the country's main platform for trading fixed income and currency instruments, and the main funding source for financial institutions. Interviews were conducted April 10 – April 21.

The full report is available as a PDF:

MNI China Liquidity Index April 2023.pdf

For full database history and full report on the MNI China Liquidity Index™, please

MNI Beijing Bureau |

To read the full story



MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.