MNI China Daily Summary: Friday, Dec 22

EXCLUSIVE: Beijing and Shanghai’s latest round of house-market relaxations may help boost volumes and revive the ailing property sector over the next few months, but price weakness will likely persist as over-leveraged developers offer discounts to boost sales, policy advisors told MNI.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY40 billion via 7-day reverse repo and CNY291 billion via 14-day on Friday, with the rates unchanged at 1.80% and 1.95%, respectively. The reverse repo operation has led to a net injection of CNY281 billion reverse repos after offsetting CNY50 billion maturity today, according to Wind Information.

RATES: China's seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.7758% from 1.8050%, Wind Information showed. The overnight repo average decreased to 1.5767% from the previous 1.7003%.

YUAN: The currency strengthened to 7.1393 against the dollar from 7.1450 on Thursday. The PBOC set the dollar-yuan central parity rate lower at 7.0953, compared with 7.1012 set on Thursday. The fixing was estimated at 7.1306 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.6225%, down from 2.6300% at Thursday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.13% to 2,914.78 while the CSI300 index rose 0.19% to 3,337.23. The Hang Seng Index was down 1.69% to 16,340.41.

FROM THE PRESS: China will reduce import tariffs for 1,010 commodities below most-favoured nation tax rates starting from Jan 1, 2024, according to a statement from the State Council Tariff Commission. The measure will support advanced manufacturing by covering short supply items such as lithium chloride, low-arsenic fluorspar, high-purity aluminium, and gas diffusion layers for fuel cells. However, China plans to raise tariffs on specific commodities including ethylene, propylene, and LCD glass substrates in accordance with WTO rules. Overall, policymakers aim to improve linking domestic and international markets and ensure the seamless operation of the nation's supply chains. (Source: 21st Century Business Herald)

Major state-owned banks will start a new round of deposit interest-rate cuts, only three months after the last round of adjustments, Yicai.com reported. Industrial and Commercial Bank of China took the lead to announce a 10bp cut to three- and six-month, and one-year time deposits, a 20bp cut to two-year, and a 25bp cut to three- and five-year since Friday. After the adjustment, the rates were reduced to 1.15-2%. Banks could further lower deposit rates to offset the pressure on profit margins following the cuts of existing mortgage rates, said Ming Ming, chief economist at CITIC Securities. The net-interest margin of commercial banks was 1.73% by end-Q3, a decrease of 0.21 percentage points from the same period last year, data by National Administration of Financial Regulation showed.The People’s Bank of China will promote the private economy to “become bigger, better and stronger," and increase new lending and loan proportion to technological innovation, private SMEs, advanced manufacturing, and green development, said PBOC Governor Pan Gongsheng at a symposium on economic and financial situation. Pan said the resilience of China’s forex market has increased significantly, and the yuan has remained stable at a reasonable and balanced level. (Source: PBOC Website)