MNI China Daily Summary: Wednesday, May 10:

EXCLUSIVE: Chinese authorities have set low initial quotas for the nascent Swap Connect platform, which launches May 15, but expect to raise trading limits once northbound appetite for yuan-denominated bonds increases, bond traders and lawyers with knowledge of the scheme told MNI.

POLICY: Li Yunze has been appointed head of China’s new financial super regulator by the CPC's Central Committee, a statement posted on the China Banking and Regulatory Commission (CBRC) said.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY2 billion via 7-day reverse repos, with the rates unchanged at 2.00%. The operation has led to a net injection of CNY2 billion as no reverse repos matures today, according to Wind Information. The operation aims to keep banking system liquidity reasonable and ample, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.8444% from 1.8174%, Wind Information showed. The overnight repo average decreased to 1.1080% from the previous 1.2342%.

YUAN: The currency strengthened to 6.9229 against the dollar from 6.9275 on Tuesday. The PBOC set the dollar-yuan central parity rate higher at 6.9299, compared with 6.9255 set on Tuesday.

BONDS: The yield on 10-year China Government Bonds was last at 2.7725%, down from Tuesday's close of 2.7825%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 1.15% to 3,319.15 while the CSI300 index decreased 0.77% to 3,996.87. The Hang Seng Index was down 0.53% to 19,762.20.

FROM THE PRESS: Authorities have granted a six-month extension on the sale of light vehicles that do not comply with the new National VI B emission standards law, which bans the sale of non-compliant vehicles from July 1, according to the Ministry of Ecology and Environment. The China Automobile Association calculated the current inventory of vehicles not meeting the new standard at 1.89 million units and said the extension was a welcome relief for the industry. The ministry said it would make efforts to monitor inventory levels and guide the industry switch to the new standard as soon as possible. (Source: Yicai)

China’s SME firms face insufficient demand and declining profits, according to the China Association of Small and Medium Enterprises. The associations’ Small and Medium Enterprise Development Index (SMEDI) for April was 89.0, a decrease of 0.3 points from the previous month, with declines noted in industrial, transportation, real estate, and social service sectors. Increases were recorded in the catering industry, while wholesale and retail industries remained unchanged. China must do more to deepen reform and open up in order to stimulate economic growth and consolidate the economic recovery, the association said. (Source: 21st Century Herald)

China needs to maintain proactive fiscal policy and prudent monetary policy to ensure the economic recovery consolidation, according to experts and analysts interviewed by Yicai. The news outlet said Q1 has shown areas of recovery, with services recovering faster than industry, but remains uncertain if the rebound in momentum can be maintained. One expert noted corporate confidence remains insufficient and the overall economy has not returned to potential growth rate yet. Land acquisitions in the property sector remain low, pointing to ongoing weakness in the housing industry rebound.