MNI China Daily Summary: Thursday, April 9

EXCLUSIVE: Rising inflation resulting from higher energy prices will constrain the pace of monetary easing by the People's Bank of China, but not change its moderately accommodative stance as it tackles weak domestic demand, policy advisors and economists told MNI.

POLICY: Chinese officials remain open to negotiating trade arrangements with the EU, despite the bloc’s recent use of trade instruments to investigate and restrict Chinese enterprises, Ministry of Commerce spokesperson He Yadong said.

LIQUIDITY: The PBOC conducted CNY500 million via seven-day reverse repos, with the rate unchanged at 1.40%, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.3310% from 1.3235% previously, Wind Information showed. The overnight repo average increased to 1.2209% from the previous 1.2178%. 

YUAN: The currency weakened to 6.8410 against the dollar from the previous 6.8274. The PBOC set the dollar-yuan central parity rate lower at 6.8649, compared with 6.8680 set on Wednesday. The fixing was estimated at 6.8300 by Bloomberg survey today.

BONDS: The yield on 10-year China government bonds was last at 1.8100%, unchanged from previous, according to Wind Information.

STOCKS: The Shanghai Composite Index fell 0.72% to 3,966.17, while the CSI300 index declined 0.64% to 4,566.22. The Hang Seng Index dropped 0.54% to 25,752.40.

FROM THE PRESS: China’s CPI is expected to rebound further year-on-year in March, while PPI may turn positive due to imported inflationary pressures from rising international oil prices, Securities Daily reported. Analysts from China Merchants Securities forecast 1.5% growth in CPI, supported by resilient service prices despite a seasonal decline in food prices after the Spring Festival. PPI may come in at 0.5% y/y, the daily said citing analysts. The National Bureau of Statistics is set to release March data on Friday.

The yuan is likely to maintain a steady to slightly stronger trend amid sharp fluctuations in the U.S. dollar index in the near term, as exports will likely maintain rapid growth amid a stabilisng external environment, while foreign-exchange market sentiment remains relatively high, said Wang Qing, analyst with Golden Credit Rating. The currency may face some technical adjustment pressure above 6.8 against the dollar with the release of forex settlement data, while regulators have consistently emphasised two-way fluctuations to rationalise market expectations, said Pang Ming, senior research fellow at the National Institution for Finance and Development. The yuan closed at 6.8274 against the dollar on Wednesday, rising significantly from the previous trading day. (Source: Economic Information Daily)

The Cross-border Interbank Payment System (CIPS) processed CNY1.22 trillion in transactions in a single day, with nearly 42,000 transactions, setting a new high, Shanghai Securities Daily reported. In March, average daily transaction volume reached CNY920 billion, the highest in a year. The Middle East Conflict has weakened the safe-haven appeal of dollar assets, leading some cross-border funds to shift towards RMB settlement, said Wang Yong, professor at the Zhengzhou Training Institute of the People's Bank of China. Meanwhile, the increase in RMB settlement of crude oil trade between major oil-producing countries and China has directly boosted CIPS trading volume, Wang said.