MNI China Daily Summary: Tuesday, March 25

EXCLUSIVE: China will need to increase consumption’s contribution to GDP to about 60% from 2024’s 44.5% to ensure 5% growth this year and offset potentially weaker exports, advisors told MNI, calling for additional funding support to boost services and a quicker introduction of childcare subsidies of at least CNY100 billion.

EXCLUSIVE: A meeting between China and U.S. leaders will likely result in a trade deal, a prominent policy advisor told MNI, noting the China-EU Bilateral Investment Treaty (BIT) may also see progress this year.

POLICY: Asia’s GDP is expected to grow by 4.5% y/y in 2025, up one percentage point from 2024, supported by China maintaining a 5% expansion from last year, an economic report released by the Boao forum in Hainan said. 

POLICY: China’s Steel Distributors PMI Index reached 52.6% in March, up 3.3 percentage points from February, breaking above the 50 expansionary mark for the first time since October 2024, the Lange Steel Network announced.

POLICY: China’s lottery ticket sales totalled CNY42 billion during February, spiking 15.3% y/y due to Spring Festival base effects, according to the Ministry of Finance.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY377.9 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net injection of CNY104.6 billion after offsetting the maturity of CNY273.3 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.9062% from 1.7690%, Wind Information showed. The overnight repo average rose to 1.7829% from 1.7469%.

YUAN: The currency weakened to 7.2640 against the dollar from the previous 7.2520. The PBOC set the dollar-yuan central parity rate higher at 7.1788 on Tuesday, compared with 7.1780 set on Monday. The fixing was estimated at 7.2624 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.8400%, up from the close of 1.8100% previously, according to chinamoney.com.cn.

STOCKS: The Shanghai Composite Index remained unchanged at 3,369.98, while the CSI300 index was down 0.06% to 3,932.30. The Hang Seng Index lost 2.35% at 23,344.25.

FROM THE PRESS: The PBOC will issue one-year medium-term lending facility (MLF) loans via a bidding system, a move signalling the MLF’s further downgrading as a policy guide, Securities Daily reported, following a PBOC statement. The central bank will offer CNY450 billion in MLF loans on Tuesday, using a fixed-quantity multiple-price bidding method, which will net inject CNY63 billion after offsetting CNY387 billion of maturing funds. The new method reduces MLF funding costs and eases pressure on banks’ net interest margin, the daily said, citing analysts’ expectations.

Premier Li Qiang signed a State Council Order emphasising that provincial, regional and municipal governments are responsible for ensuring the payment of funds to small and medium-sized enterprises within their administrative regions, 21st Century Business Herald reports. The order clarifies an SME payment term of a maximum 60 days when selling to government agencies, public institutions and large enterprises. Authorities will increase penalties for violations involving illegal acts of retaliation and abuse of power. The order comes into force on June 1.

China’s national general public budget revenue reached CNY4.3 trillion during January and February, down 1.6% y/y, while expenditure totalled CNY4.5 trillion, a y/y increase of 3.4%, according to Ministry of Finance data. Debt interest payment expenditure hit CNY156 billion, a y/y increase of 19.7%, while the science and technology outlay amounted to CNY112 billion, a 10.6% y/y increase. Spending on urban and rural communities was CNY342.7 billion, down 6.6% y/y.