MNI China Daily Summary: Friday, December 9

DATA: China's November Consumer Price Index fell to an eight-month low of 1.6% y/y, in line with the median forecast, while slowing sharply from October's 2.1% y/y pace as Covid-19 outbreaks and a high base effect sapped the gain, data from the National Bureau of Statistics released showed. The producer price index eased for the 13th straight month from a high base to fall 1.3% y/y, compared to a 1.3% decline in October. The figure was better than the forecast 1.5% y/y fall, though it hit the lowest level since November 2020.

POLICY: Chinese regulators are preparing to launch the Swap Connect next year, which will provide global investors with access to China's derivatives market, said Huo Yingli, party secretary of the China Foreign Exchange Trade System, at a forum. The scheme, which was signed with Hong Kong Stock Exchange in July, will further open up China’s onshore financial market by allowing access to interbank interest rate swaps.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY2 billion via 7-day reverse repos with the rate unchanged at 2.0%. This keeps the liquidity unchanged after offsetting the maturity of CNY2 billion repos today, according to Wind Information. The operation aims to keep 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 1.7293% from 1.6609% on Thursday, Wind Information showed. The overnight repo average fell to 1.0591% from the previous 1.0712%.

YUAN: The currency strengthened to 6.9480 against the dollar from 6.9728 on Thursday. The PBOC set the dollar-yuan central parity rate lower at 6.9588 on Friday, compared with 6.9606 set on Thursday.

BONDS: The yield on 10-year China Government Bonds was last at 2.9125%, down from Thursday's close of 2.9150%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.30% to 3,206.95 while the CSI300 index gained 0.99% to 3,998.24. The Hang Seng Index rallied 2.32% to 19,900.87.

FROM THE PRESS: China’s economic growth will continue to pick up after the relaxation of Covid control measures, CCTV News reported citing Premier Li Keqiang speaking in a meeting with David Malpass, president of the World Bank on Thursday. China will keep the yuan basically stable at a reasonable and balanced level, which will help maintain the stability of the international supply chain, said Li when meeting Kristalina Georgieva, managing director of International Monetary Fund on the same day. China is willing to strengthen macro policy coordination and address debt and climate change challenges with all parties, as it continues to promote high-level opening up, Li added.

The PBOC's Shanghai head office and other local regulators in the city pledged to support the reasonable growth of real estate financing, maintain the stable supply of development loans and support the reasonable extension of maturing developers’ debts, Yicai.com reported citing a work conference on Thursday. Efforts should be made to meet borrowing demands for first- and second-homes purchases. Regulators will assist and support real estate companies seeking financing in the capital markets, including mergers and acquisition involving housing projects, the meeting said.

China plans to increase the use of real-estate investment trusts (REITs) to support the troubled sector, according to the Securities Daily. China will speed up the use of REITs in the affordable rental housing sector and expand the current pilot scheme to include long-term rental housing and commercial real estate, the paper said, quoting recent remarks by Li Chao, vice chairman of the China Securities Regulatory Commission (CSRC). The move will provide an important channel for increasing liquidity, revitalising existing assets and introducing equity funds that will help reduce leverage.