MNI China Daily Summary: Friday, December 20
EXCLUSIVE: Beijing will increase local government special bond issuance next year to fund the purchase of unsold homes and idle land for affordable housings, as policymakers aim to stem property market declines, advisors told MNI, pushing back against the feasibility of a national real-estate fund.
EXCLUSIVE: China’s reference lending rate is likely to fall about 50bp in 2025 as the central bank pushes to reduce funding costs across the economy and stoke demand, despite persistent concerns over record low long-term bond yields and the yuan’s depreciation.
POLICY: China's Loan Prime Rate remained unchanged according to a People's Bank of China statement, in line with expectations and following the central bank's decision to hold its key 7-day reverse repo rate stable.
LIQUIDITY: The PBOC conducted CNY101.6 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY103.5 billion after offsetting the maturity of CNY205.1 billion today, according to Wind Information.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.5713% from 1.6880% on Thursday, Wind Information showed. The overnight repo average decreased to 1.4153% from 1.4286%.
YUAN: The currency strengthened to 7.2985 against the dollar from 7.2992 on Thursday. The PBOC set the dollar-yuan central parity rate lower at 7.1901, compared with 7.1911 set on Thursday. The fixing was estimated at 7.3060 by Bloomberg survey today.
BONDS: The yield on 10-year China Government Bonds was last at 1.6850%, down from Thursday's close of 1.7200%, according to chinamoney.com.cn.
STOCKS: The Shanghai Composite Index edged down 0.06% to 3,368.07, while the CSI300 index declined 0.45% to 3,927.74. The Hang Kong Exchange fell 0.16% to 19,720.70.
FROM THE PRESS: China’s plans for a more proactive fiscal policy will drive an increase in government bond issuance, quicker allocation of fiscal funds and structural changes to improve public welfare and boost consumption, the state-run Xinhua News Agency reported, citing Liu Rihong, an official at the State Council Research Office. Authorities can reduce household hesitation to consume through increased investment in public services and improving the supply of entertainment, sports, elderly and child-care services, Li added.
China’s total electricity consumption reached 785 billion kWh in November, up 2.8 y/y and slower than the 7.1% growth during the first 11 months, according to National Energy Administration data. Last month, electricity consumption from primary, secondary and tertiary industries went up 7.6%, 2.2% and 4.7%, while household consumption edged up 2.9% y/y, the administration said. From January to November, primary, secondary and tertiary industry demand increased 6.8%, 5.3% and 10.4%, with household appetite up 11.6%.
The Chinese economy is expected to grow about 5% in 2025 amid increased countercyclical adjustments and base effects, Securities Daily reported, citing analysts. Authorities will support growth by coordinating an expansion in government debt with reserve requirement ratio and interest-rate cuts, the newspaper said, citing Li Zhan, chief economist at China Merchants Fund, who noted the government could access reserve policies to deal with uncertain events next year.