MNI China Daily Summary: Friday, March 7

POLCY: The People’s Bank of China has kept to its stance of being prepared to support the yuan despite the imposition of fresh U.S. tariffs, and while the central bank has indicated it will keep a close eye on the volatile trade outlook, traders and advisors told MNI that for now they do not expect significant depreciation against the dollar this year. (see MNI: PBOC Persists With Yuan Support For Now-Advisors )

POLICY: China could open its visa-free visitor scheme further, after expanding the arrangement to 38 countries recently, said Wang Yi, China’s foreign minister on Friday.

DATA: China's exports grew 2.3% y/y to USD539.94 billion in the first two months of 2025, missing the 5.9% y/y consensus. Imports, which amounted to USD369.43 billion, registered a 8.4% y/y drop, far behind from the consensus of a 1.0% y/y increase. China’s trade surplus in the Jan-Feb period hit USD170.5 billion, compared with the consensus of USD147.5 billion.

LIQUIDITY: The PBOC conducted CNY185 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY99.5 billion after offsetting the maturity of CNY284.5 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.7867% from 1.7739% previously, Wind Information showed. The overnight repo average increased to 1.7837% from the previous 1.7613%. 

YUAN: The currency strengthened to 7.2382 against the dollar from the previous 7.2428. The PBOC set the dollar-yuan central parity rate higher at 7.1705, compared with 7.1692 set on Thursday. The fixing was estimated at 7.2413 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.7850%, up from the previous close of 1.7420%, according to Wind Information.

STOCKS: The Shanghai Composite Index fell 0.25% to 3,372.55, while the CSI300 index decreased 0.31% to 3,944.01. The Hang Seng Index rallied 0.57% to 24,231.30.

FROM THE PRESS: 

• Beijing's 100 basis point increase of the deficit-to-GDP ratio by 100 basis points to 4% sends a positive signal, said Yang Zhiyong, head of the Chinese Academy of Fiscal Sciences, adding that the move reserved policy space while also accounting for debt balance. Yang stated that the government's 5% GDP growth target amidst rising external uncertainties, particularly the U.S. tariff threat, reflects policymakers' confidence in driving an economic rebound, though achieving it will require considerable effort.
• Authorities should stimulate property demand by further lowering the down-payment ratio and mortgage-interest rates for home buyers, Yicai.com reported, citing Yang Kewei, researcher at China Real Estate Information Corp, adding that downward space for outstanding mortgage rates also remained. Meanwhile, authorities should support large-private developers by promoting restructuring and smoothing financing to restore normal operations and market confidence, the newspaper said, citing analysts.
• China’s central government general public budget is projected to generate CNY9.7 trillion, down 3.5% y/y, according to Yicai.com, citing recent government reports. However, when one-time factors are removed, revenue is expected to increase by 2.1%. The Local Government Fund budget revenue is expected to reach CNY5.7 trillion, a growth of 0.1% y/y, indicating land sales, which account for 85% of local government revenues, will stabilise in 2025 after three consecutive years of decline.