MNI China Daily Summary: Monday, May 12

POLICY: China and the U.S. agreed to slash reciprocal tariffs by 91% from 125% and establish a mechanism to continue negotiations, according to a joint statement released on the Ministry of Commerce website Monday.

POLICY: China’s east-central Anhui province, the nation’s largest automobile manufacturing hub, could surpass its official 5.5% GDP growth target this year, driven by rising output of electric vehicles and batteries, with local officials telling MNI the strong performance reflects export demand increasingly insulated from the U.S. market.

DATA: China's Consumer Price Index fell 0.1% y/y in April, the same as March's 0.1% decline, meeting market expectations, mainly affected by falling global oil prices, data from the National Bureau of Statistics showed on Saturday.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY43.0 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY43.0 billion as no repos mature today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4967% from 1.5409% , Wind Information showed. The overnight repo average decreased to 1.4136% from 1.4908%. 

YUAN: The currency weakened to 7.2132 against the dollar from the previous 7.2461. The PBOC set the dollar-yuan central parity rate lower at 7.2066, compared with 7.2095 set on Friday. The fixing was estimated at 7.2441 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.6470%, up from the previous close of 1.6290%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.82% to 3,369.24, while the CSI300 index increased 1.16% to 3,890.61. The Hang Seng Index rose 2.98% to 23,549.46.

FROM THE PRESS: China and the U.S. have agreed to establish a formal mechanism for economic and trade negotiations, with further details and a joint statement expected to be released on Monday, according to Xinhua News Agency. The high-level talks, held in Geneva over the weekend, were described as candid, in-depth, and constructive, with significant consensus reached and substantial progress made, Xinhua reported, citing China’s top trade negotiator, He Lifeng.

China’s SME Development Index fell 0.3 points m/m to 89.2 in April, data from the China Association of Small and Medium Enterprises showed. Ma Bin, executive vice president at the association, said officials must implement current policies and introduce incremental reserve policies in a timely manner, as well as ensure all levels of government implement the new private economy law. Macroeconomic perception's fell by 0.9 points while the labour index declined 0.3 points, the data showed.

Several regional small and medium-sized banks in China have lowered deposit interest rates in a bid to further reduce funding costs, according to Securities Daily. Following the adjustment, interest rates on certain banks’ three- and five-year medium- to long-term deposits have fallen below 2%. Analysts anticipate this downward trend will persist, citing ongoing pressure from narrowing interest rate spreads, the report said.