MNI China Daily Summary: Monday, March 2

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY19 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY19 billion as no reverse repos mature today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4639% from 1.5034%, Wind Information showed. The overnight repo average decreased to 1.3115% from 1.3189%. 

YUAN: The currency weakened to 6.8855 against the dollar from the previous 6.8559. The PBOC set the dollar-yuan central parity rate higher at 6.9236, compared with 6.9228 set on Friday. The fixing was estimated at 6.8641 by a Bloomberg survey today.

BONDS: The yield on 10-year China government bonds was last at 1.7940%, up from the previous close of 1.7900%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.47% to 4,182.59, while the CSI300 index increased 0.38% to 4,728.67. The Hang Seng Index lost 2.14% to 26,059.85. 

FROM THE PRESS: China is likely to set a GDP growth target of around 5% for 2026 at this week’s National People’s Congress, chief economists interviewed by Yicai said, citing the country’s long-term goal of doubling total economic output by 2035 and the weighted growth targets set at local “Two Sessions” earlier this year. Zhang Lin, deputy president of Far East Credit Rating Research Institute, said the national GDP target was historically set slightly below the weighted average of major provincial targets. The national target could also edge down to a range of 4.5% to 5%, after provinces lowered their growth expectations to around 5%, Zhang added.

China must pursue economic development goals that address not only aggregate growth but also its quality, while giving due weight to ecological protection, development security, social equity and common prosperity, Qiushi, the Chinese Communist Party’s official journal, said. China’s economy faces challenges including a mismatch between strong supply and weak demand, as well as sluggish growth in corporate profits and household incomes, the journal said. Policymakers must strengthen coordination and improve the consistency of macro policy orientation to send clear and consistent signals to the market, and stabilise expectations while boosting confidence, it said. All regions and government departments should strengthen their capacity to maintain policy consistency, exercise caution in introducing contractionary or restrictive policies and sustain the momentum of steady economic improvement, 21st Century Business Herald reported citing the journal.

China’s central bank has cut the foreign exchange risk reserve ratio for forward foreign exchange sales to 0% from 20% to promote development of the foreign exchange market and help companies manage exchange rate risks, Securities Daily reported. Industry experts told the newspaper the move will lower the cost of forward foreign exchange purchases for companies, boost their willingness to hedge when buying foreign currency and support the use of foreign exchange derivatives to manage currency risks. Reducing the reserve ratio will also enable financial institutions to offer exchange rate risk management products at more reasonable prices and marks a concrete step in implementing a broader policy package, an industry expert said.