MNI China Daily Summary: Friday, March 19

LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with rates unchanged at 2.2% on Friday. This keeps the liquidity unchanged after offsetting the maturity of CNY10 billion repos today, according to Wind Information. The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 2.1798% from Thursday's close of 2.1818%, Wind Information showed. The overnight repo average fell to 2.1137% from 2.1962% on Thursday.

YUAN: The currency weakened to 6.5045 against the dollar from Thursday's close of 6.5017. The PBOC set the dollar-yuan central parity rate higher at 6.5098, compared with the 6.4859 set on Thursday.

BONDS: The yield on 10-year China Government Bonds was last at 3.2800%, down from Thursday's close of 3.2940%, according to Wind Information.

STOCKS: The Shanghai Composite Index tumbled 1.69% to 3,404.66, while the CSI300 index declined 2.62% to 5,007.09. The Hong Kong's Hang Seng Index dropped 1.41% to 28,990.94.

FROM THE PRESS: China's local governments will kick off the issuance of special bonds this month after the Ministry of Finance disbursed CNY1.77 trillion out of a total CNY3.65 trillion in quotas set this year, the China Securities Journal reported. Funds raised by the bonds will largely be invested in infrastructure, the newspaper said citing analysts. Fiscal spending on improving social security, healthcare and stabilizing the job market grew rapidly in the first two months, as revenue jumped 18.7% y/y as the economy rebounded from last year's pandemic, the newspaper reported citing He Daixin, head of fiscal research at the National Academy of Economic Strategy.

The rising 10-year U.S. Treasury bond yield may have little impact on the Chinese market even if it reaches around 2% from the current 1.7%, given the independence of China's monetary policy and the 150 bps-wide interest rate spread between the two economies, said Ming Ming, deputy research director at CITIC Securities in a report. The spread may still be more than 120 bps even if Treasury yield stands at 2%, said Ming. However, the rising yield along with global inflation may cause the yuan to be more volatile, he said.

China should encourage private equity firms and venture capitalists to become involved in funding its ambitious carbon-reduction push through selling bonds, providing insurance and raising funds, the 21st Century Business Herald reported citing a report from an institute headed by Ma Jun, an advisor to the People's Bank of China. A green financial system with active private capital participation is essential to achieving carbon neutrality given the target requires about CNY138 trillion of investment, Ma said.