MNI China Daily Summary: Wednesday, April 2

EXCLUSIVE: China is expected to increase financing support for property companies to prevent a fresh wave of defaults disrupting the ongoing recovery, while accelerating the acquisition of unsold homes and land to alleviate the liquidity crunch, advisors and analysts told MNI, as developers face mounting bond maturities this year.

POLICY: China’s balance of small and micro enterprise loans reached CNY33.9 trillion at the end of February, up 12.6% y/y, said Jiang Ping, director of the Inclusive Finance Department at the State Administration of Financial Supervision Administration, speaking with reporters.

POLICY: China will establish a guideline-based price band mechanism for essential goods and improve emergency response systems to address abnormal price fluctuations, Xinhua reported, citing guidelines issued by General Office of the CPC Central Committee and the State Council.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY229.9 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY225.5 billion after offsetting the maturity of CNY455.4 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.8418% from 1.8421%, Wind Information showed. The overnight repo average decreased to 1.7392% from 1.8319%.

YUAN: The currency weakened to 7.2719 to the dollar from the previous 7.2687. The PBOC set the dollar-yuan central parity rate higher at 7.1793 on Wednesday, compared with 7.1775. The fixing was estimated at 7.2678 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.7850%, down from the previous close of 1.8100, according to Wind Information.

STOCKS: The Shanghai Composite Index increased 0.05% to 3,350.13, while the CSI300 index fell 0.08% to 3,884.39. The Hang Seng Index declined 0.02% at 23,202.53.

FROM THE PRESS: China’s services trade grew 9.9% y/y to CNY1.3 trillion in the first two months, with exports and imports growing 13% and 7.8%, according to data from the Ministry of Commerce. The services trade deficit was CNY210 billion, a decrease of CNY8.5 billion from the same period last year. Travel services increased 29%, with exports and imports rising 142.6% and 21.1%. (Source: Securities Daily)

China will promote a pilot cash-pooling service nationwide for multinational companies to integrate domestic and foreign currency management, according to a draft statement released by the People’s Bank of China. The initiative, currently open for public feedback, further facilitates the transfer and use of funds, and reduces corporate costs. The pilot programme launched in Beijing and Shenzhen in 2021 before expanding to eight other regions in 2022. (Source: China Securities Journal)

China issued a record CNY2.85 trillion of local government bonds in Q1, up 80% y/y, of which new bonds reached CNY1.25 trillion, an increase of about 48% y/y, while refinancing bonds amounted to approximately CNY1.6 trillion, up 119% y/y, Yicai reported, citing China Bond Information Network data. Hu Hengsong, secretary-general at the China Urban Investment 50 Forum, said the issuance of new special bonds this year was fast given some 15th Five-Year Plan projects have been launched ahead of schedule. Wen Laicheng, a professor at the Central University of Finance and Economics, noted local governments relied on issuing bonds to raise funds needed to stabilise investment and the economy after fiscal revenue growth proved sluggish.