MNI EM China Daily Summary: Tuesday, April 16

TOP NEWS: The Chinese economy grew by 5.3% y/y, or 1.6% q/q, in Q1, beating the 4.6% forecast and accelerating from 2023's 5.2% growth, data released by the National Bureau of Statistics (NBS) showed. Industrial production rose 4.5% y/y in March, decelerating from the 7.0% growth in the first two months and underperforming the expected 5.2%. Retail sales also slowed to 3.1% y/y in March from the previous 5.5% gain, missing the 5.6% forecast. Fixed-asset investment registered a 4.5% y/y increase to hit the highest since April 2023, rising from the 4.2% growth over the Jan-Feb period and beating the 3.2% consensus.

POLICY: China’s stronger-than-expected Q1 GDP of 5.3% is mainly driven by the rebound in industrial output and the improvement of the services industry, said Sheng Laiyun, deputy director of the NBS at a press conference.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY2 billion via 7-day reverse repo, with the rates unchanged at 1.80%. The operation has led to no change to the liquidity after offsetting the maturity of CNY2 billion today, according to Wind Information.

RATES: China's seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.8155% from 1.8069%, Wind Information showed. The overnight repo average rose to 1.7157% from 1.7090%.

YUAN: The currency weakened to 7.2396 from 7.2385 at Monday's close. The PBOC set the dollar-yuan central parity rate higher at 7.1028, compared with 7.0979 set on Monday. The fixing was estimated at 7.2457 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.2710%, down from Monday's close of 2.2726%, according to Wind Information.

STOCKS: The Shanghai Composite Index lost 1.65% to 3,007.07 while the CSI300 index fell 1.07% to 3,511.11. The Hang Seng Index tumbled 2.12% to 16,248.97.

FROM THE PRESS: The PBOC will likely cut the rate of the medium-term lending facility around mid-year by about 0.1-0.2 percentage points to stabilise real estate and boost demand while prices will remain low in the near future, said Wang Qing, analyst at Golden Credit Rating. The PBOC kept the MLF rate unchanged Monday due to stronger-than-expected macroeconomic data in the first two months and relatively high level financing for the real economy in Q1, said Zhou Maohua, analyst from China Everbright Bank. (Source: China Securities Journal)

The PBOC will aim to deal with existing risks in an orderly and effective manner and further improve the early risk correction mechanism to curb incremental hazards, the central bank said Monday in a statement on its website. It is necessary to strengthen the analysis of the overall financial stability situation from a macro perspective, improve the risk monitoring and assessment system and the systemic risk identification mechanism, and strengthen risk reminders and early warnings, the PBOC said.

Chinese exporters may face weakening demand after overseas customers replenished inventory in Q1 which had supported the high growth so far this year, said Mei Xinyu, researcher at the Chinese Academy of International Trade and Economic Cooperation. Though exports grew 7.1% y/y from January to February, they fell short of 2022 levels, said Mei, also pointing to the lower comparison base for the same period last year. Mei emphasised China needs to consolidate its traditional labour-intensive manufacturing base and processing trade to provide the modern service industry and high-end manufacturing with better support facilities. (Source: 21st Century Business Herald)