MNI China Daily Summary: Friday, February 10

POLICY: China's Consumer Price Index rose 2.1% y/y in January, which was in line with market expectations but up from December’s 1.8% y/y as food prices increased due to Chinese New Year and consumption recovered after the lifting of Covid controls, data from the National Bureau of Statistics released on Friday showed.

POLICY: China’s new loans jumped in January at a stronger-than-expected pace as efforts to boost credit expansion took effect after Covid controls were eased, People's Bank of China data showed on Friday.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY203 billion in operations via 7-day reverse repos with the rates unchanged at 2.00%. The operation led to a net injection of CNY180 billion after offsetting the maturity of CNY23 billion reverse repos 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) edged down to 1.9405% from 2.2100% on Thursday, Wind Information showed. The overnight repo average fell to 1.8026% from the previous 2.2872%.

YUAN: The currency closed at 6.7999 against the dollar at 16:30pm Beijing time from 6.7817 on Thursday. The PBOC set the dollar-yuan central parity rate lower at 6.7884, compared with 6.7905 set on Thursday.

BONDS: The yield on the 10-year China Government Bond was last at 2.9040%, unchanged from Thursday's close of 2.9040%.

STOCKS: The Shanghai Composite Index fell 0.30% to 3260.67, while the CSI300 index was down 0.59% to 4,106.31. The Hang Seng Index was down 2.01% to 21,190.42.

FROM THE PRESS: Car sales in China will rebound in February following a drop in sales during January, as local governments and car companies increase purchase incentives and Lunar New Year festival disruptions subside, according to the Securities Daily. The paper said following the ending of central government subsidies on new energy vehicles at the start of this year, many local governments have stepped in with purchase incentives to stabilize market demand. Additionally, the car market in China has far from peaked, as a strong backlog of new drivers are set to enter the market. Citing experts, the paper said measures should be taken to accelerate the pace of car exports, and enhance the global competitiveness of China’s new energy vehicle industry.

Next generation infrastructure projects such as 5G networks, smart-parks and green energy transformation will play an important role in stabilising the economy in 2023 and boosting high quality development, according to the Securities Daily. The paper quotes several local governments as prioritising support for next generation infrastructure, such as for land and financing. By 2025, investment in China's new infrastructure will reach CNY13.9 trillion, the paper said. Next generation infrastructure will also benefit from increased use of quasi-fiscal tools, the introduction of real-estate investment trust type financing models, and public-private partnerships.

The recent boom in homeowners voluntarily increasing their mortgage repayments comes at the expense of boosting consumption in 2023, and this will continue for several months unless measures are taken to incentivise people to save less, according to an editorial by Yicai.com. The news outlet said the repayment issue could be solved by reducing legacy mortgage rates of 6-7% closer to recently available rates of around 4%. Macro-policies are needed to ensure strong economic growth for 2023, in order to boost consumer confidence and encourage expenditure over precautionary savings, the paper said.