MNI China Press Digest May 10: Q2 GDP, Deposit Rate, Weak Yuan

The following lists highlights from Chinese press reports on Tuesday:

• China’s GDP may slow to about 2.1% in Q2 from Q1's 4.8%, as growth in some provinces may contract due to pandemic lockdowns, said Sheng Songcheng, a former director of the Statistics and Analysis Department of the People's Bank of China in a blog post. Sheng added that H1 GDP may come in around 3.5%. It is necessary to control the pandemic and resume work and production as soon as possible, said Sheng, who expects a rebound in the second-half of the year. Monetary policy should pay more attention to the use of quantitative tools to work with fiscal policy and buffer the spillover effects of the Fed's monetary tightening and imported inflation pressures, said Sheng.
• The People’s Bank of China has established a market-based mechanism for deposit interest rates, allowing member banks to refer to the 10-year treasury bond yield and the benchmark 1-year Loan Prime Rate to adjust rates, Caixin reported citing the PBOC’s Q1 monetary policy report published on Monday. This is the first official disclosure of such a mechanism which would allow banks to stabilise debt costs and promote a further decline in actual lending rates, Caixin said. In the last week of April, the weighted average interest rate of new deposits in financial institutions nationwide was 2.37%, down 10 basis points from the previous week, Caixin said.
• The yuan may still fluctuate widely in the short term, but it is unlikely to sharply depreciate as a rapid surge in the U.S. dollar index is approaching its end, the Securities Daily reported citing analysts. The sharp appreciation of the U.S. dollar in the short term is the main driving factor recent yuan weakness. The 10-year U.S. bond yield has risen above 3%, basically reflecting the expectation for Fed rate hikes and balance sheet reductions within the year, the newspaper said citing Wang Qing, chief analyst at Golden Credit Rating. On Monday, the onshore yuan once dipped to an intraday low of 6.7235, the lowest since Nov. 5 2020, while the dollar index has stood above 100 since mid-April, the newspaper said.