MNI China Daily Summary: Thursday, February 20

EXCLUSIVE: China's refreshed focus on inflation will see a likely reduction of its annual 3% CPI target to 2% at next month's National People's Conference, advisors and economists told MNI, noting the economy would still fail to meet the new objective.

POLICY: China's Loan Prime Rate remained unchanged according to a People's Bank of China statement, in line with expectations as the central bank held its easing pace to curb over-leverage in the bond market and reduce pressure on the yuan.

POLICY: China will support foreign firms through standardising government procurement activity to ensure equal access with Chinese companies, said Li Ji, a vice minister at the Ministry of Commerce, noting the issue had become a concern of international enterprises.

POLICY: The U.S. should work with other countries to find solutions through consultation before imposing reciprocal tariffs on trading partners, He Yadong, spokesperson for the Ministry of Commerce said.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY125 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY0.8 billion after offsetting the maturity of CNY125.8 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 2.0622% from 2.0587%, Wind Information showed. The overnight repo average increased to 1.9460% from 1.9142%.

YUAN: The currency strengthened to 7.2616 against the dollar from 7.2851 on Wednesday. The PBOC set the dollar-yuan central parity rate higher at 7.1712, compared with 7.1705 set on Wednesday. The fixing was estimated at 7.2874 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.7000%, up from Wednesday's close of 1.6700, according to Wind Information.

STOCKS: The Shanghai Composite Index fell 0.02% to 3,350.78 while the CSI300 index decreased 0.29% to 3,928.90. The Hang Seng Index was down 1.60% to 22,576.98.

FROM THE PRESS: 

China’s stock and bond markets simultaneously achieved net inflows of foreign capital in January for the first time since August, attracting over USD10 billion, Shanghai Securities News reported citing data by Institute of International Finance. The stock market saw a net inflow of about USD2 billion, the highest since September, mainly driven by the country’s AI and semiconductor development, while the bond market attracted a net USD8.1 billion flow, as yuan bonds’ low volatility showed increasing attractiveness, the newspaper said citing analysts.

The People’s Bank of China will need to hold off cutting interest rates or the reserve requirement ratio due to cooling expectations for a U.S. Federal Reserve rate cut and yuan depreciation pressure amid the uncertainty of American tariff hikes, Yicai.com reported citing analysts. The Chinese economy requires further stimulus measures despite some initial signs of stabilising in the housing and stock market. More supporting policies for private enterprises, especially for real estate and foreign-funded companies, will likely be increased in the near term, the newspaper said citing economists.

China moves to improve the quality of goods and services and consumer rights protection to help boost spending, according to a three-year plan released by five departments. Authorities will support a consumption upgrade by encouraging the replacement of electric vehicles and smart home appliances, as well as creating new scenarios for digital, green and health consumption, the document said. (Source: Securities Times)