MNI China Daily Summary: Thursday, March 30

EXCLUSIVE: China could cut its reserve requirement ratio (RRR) by another 50bp this year as banks remain at risk from the troubled property sector and a squeeze on net interest margins despite proving resilient against U.S. and European banking turmoil, leading China banking analyst Charlene Chu told MNI.

POLICY: Asian countries must jointly create a global growth center and strengthen regional connections to provide certainty for the changing world, China Premier Li Qiang said during Thursday's opening ceremony of the Boao Forum For Asia Annual Conference 2023.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY239 billion of operations via 7-day reverse repos on Thursday, with the rates unchanged at 2.00%. The operation led to a net injection of CNY175 billion after offsetting the maturity of CNY64 billion reverse repos today, according to Wind Information. The operation aims to keep banking system liquidity stable at the end of the quarter, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 2.2885% from 2.1369%, Wind Information showed. The overnight repo average decreased to 0.7552% from the previous 0.8264%.

YUAN: The currency strengthened to 6.8781 against the dollar from 6.8883 on Wednesday. The PBOC set the dollar-yuan central parity rate higher at 6.8886, compared with 6.8771 set on Wednesday.

BONDS: The yield on 10-year China Government Bonds was last at 2.8725%, unchanged from Wednesday's close of 2.8725%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.65% to 3,261.25, while the CSI300 index increased 0.81% to 4,038.53. The Hang Seng Index was up 0.58% to 20,309.13.

FROM THE PRESS: World monetary authorities should jointly consider if raising interest rates by a further 25-50bp is appropriate in a highly volatile global environment, according to Lu Lei, deputy director of the State Administration of Foreign Exchange. Speaking at the Boao Forum, Lu said liquidity secures economic stability, along with growth and inflation. In China, the central bank uses its open market operation to adjust liquidity needs of the financial system, he adds. When good banks and financial institutions run into difficulty due to liquidity issues, central banks should provide relevant support, he noted.

US sanctions against Russia have undermined the US dollar's integrity and caused a crisis of trust around the world, according to Zhu Min, former vice president of the International Monetary Fund. Recent events increased the need to diversify away from the dollar, with the yuan an alternative that benefits from a high level of trust, Zhu said on the sidelines at the Boao Forum. Citing the recent CNY loan cooperation agreement between Saudi Arabia and China, he said a lack of exchange-rate risk when using yuan to purchase Chinese goods made trade more convenient.

China's financial market will support the green transition by balancing long- and short-term goals, and through the development of derivatives products, according to Zhou Xiaochuan, ex-governor of the People’s Bank of China. Speaking at the Boao Forum in Hainan, Zhou said China will take steps to strengthen regulation of the carbon market and use price-based and non-price based policy tools to implement carbon neutrality. (Source: China Securities Daily)