SHANGHAI, March 6 China's benchmark money rate tumbled 133 basis points on Thursday morning after Beijing set a strong economic growth target for 2014, which some watcher watchers suggested means monetary loosening is on the way.
The seven-day repo opening quote was 2.45 percent, compared with the close of 3.78 percent on Wednesday.
If the market holds around that level, it would be the biggest single-day drop since Dec. 24.
The market may have taken comfort from the relatively mild drain executed by the People's Bank of China (PBOC) during open market operations on Thursday morning.
The PBOC only drained a net 70 billion yuan ($11.42 billion) from money markets this week, far less than last week's drain of 160 billion yuan -- which traders already considered lower than expected, and interpreted as a sign that the PBOC is moving away from an earlier strategy to raise short-term rates.
The PBOC has been struggling to balance the need to force Chinese corporations and banks to deleverage without dinging economic growth.
Recent signs of weakening industrial production and stress in real estate markets may have contributed to regulatory unease.
The decline comes while the National People's Congress is still in session in Beijing, and some traders say the PBOC is trying to engineer market rallies to serve as an optimistic backdrop to the political event.
In a State of the Union style address to an annual parliament meeting that began on Wednesday, Premier Li Keqiang said China aimed to expand its economy by 7.5 percent this year, the same target as last year, although he stressed that growth would not get in the way of reforms.
The government will keep annual growth in broad M2 money supply at about 13 percent, Li said in his first work report since taking office a year ago. ($1 = 6.1282 Chinese yuan)