MNI China Daily Summary: Thursday, April 22

EXCLUSIVE: China's Loan Prime Rate will likely remain stable over the coming months following the central bank’s warning that excessively low interest rates could negatively impact competition, production capacity control and reduce inventory in some sectors.

POLICY: China's Loan Prime Rate remained unchanged on Monday according to a People's Bank of China statement, in line with market expectation following the central bank’s decision to hold its policy rate steady as U.S. dollar strength weighs on the yuan and solid Q1 GDP growth reduces the need for monetary easing in the short term.

POLICY: China will accelerate resolving local government debt risks, pushing the reform and transformation of local government financing vehicles, said Vice Minister of Finance Wang Dongwei at a press conference on Monday.

LIQUIDITY: The PBOC conducted CNY2 billion via 7-day reverse repo, with the rates unchanged at 1.80%. The operation has led to no change to the liquidity after offsetting the maturity of CNY2 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.8351% from 1.8775% on Wednesday, Wind Information showed. The overnight repo average decreased to 1.7814% from the previous 1.7975%.

YUAN: The currency weakened to 7.2436 against the dollar, from 7.2401 at Wednesday's close. The PBOC set the dollar-yuan central parity rate lower at 7.1043, compared with 7.1046 set on Friday.

BONDS: The yield on 10-year China Government Bonds was last at 2.2875%, down from Wednesday's close of 2.3000%, according to Wind Information.

STOCKS: The Shanghai Composite Index fell 0.67% to 3,044.60, while the CSI300 index was down 0.30% to 3,530.90. The Hang Seng Index increased 1.77% to 16,511.69.

FROM THE PRESS: China’s commerce ministry and nine other departments have jointly released 16 measures to facilitate and encourage foreign institutions to invest in domestic technology enterprises, Shanghai Securities News reported. Applications for qualified foreign institutional investor (QFII) and RMB qualified foreign institutional investor (RQFII) will be reviewed and approved efficiently. Authorities will continue to improve forex management under direct investment and better support foreign investors’ equity investments especially via the Qualified Foreign Limited Partner (QFLP) scheme.

China Securities Regulatory Commission’s latest 16 measures to provide comprehensive support for technology enterprises from listing financing, mergers and acquisitions, bond issuance and private equity investment will likely help normalise IPOs after the authorities tightened listing rules to strengthen market regulations, Yicai.com reported. High-quality tech firms meeting listing conditions will return to the IPO process, as the new measures emphasise increased review efficiency and transparency, and improving the “green channel” for listing and financing, said Yicai citing analysts.

Beijing can introduce a local resource and environmental protection tax to provide a stable source of revenue should fiscal reforms happen, according to Jia Junxue, director at the China Fiscal Society and professor at Renmin University. However, policymaker reforms may not be as beneficial compared to the tax-sharing changes of 1994, due to the maturity of today's system. Local governments see revenue and expenditure weakening, indicating a problem with fiscal stability, said Yin Heng, professor at the National Institute of Development Strategy of Renmin University.