MNI China Daily Summary: Friday, January 10
EXCLUSIVE: China and the U.S. are unlikely to reach a standalone agreement on the appreciation of the yuan since any trade deal would inherently imply a resolution of bilateral trade disputes, a prominent economist told MNI in an interview, adding a deal would help stabilise the currency.
POLICY: The People’s Bank of China (PBOC) has suspended bond purchases as treasury yields continue to fall fuelled by policy easing expectations.
POLICY: China’s fiscal policy this year will be "very proactive", fully taking into account the need to increase countercyclical adjustment, Liao Min, Vice Minister of Finance told a press conference.
LIQUIDITY: The PBOC conducted CNY4.5 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY14.8 billion after offsetting the maturity of CNY19.3 billion today, according to Wind Information.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.7472% from 1.6526% on Thursday, Wind Information showed. The overnight repo average increased to 1.6747% from 1.5600%.
YUAN: The currency weakened to 7.3326 against the dollar from 7.3320 on Thursday. The PBOC set the dollar-yuan central parity rate higher at 7.1891, compared with 7.1886 set on Thursday. The fixing was estimated at 7.3315 by Bloomberg survey today.
BONDS: The yield on 10-year China Government Bonds was last at 1.6475%, up from Thursday's close of 1.6250%, according to chinamoney.com.cn.
STOCKS: The Shanghai Composite Index fell 1.33% to 3,168.52, while the CSI300 index fell 1.25% to 3,732.48. The Hang Seng Index was down 0.92% at 19,064.29.
FROM THE PRESS: Market investors should have sufficient reason to believe in the PBOC’s determination and ability to correct any sharp rises and falls in the exchange rate given the abundant tools it has, said Securities Times in a commentary. The strengthened counter-cyclical factor in its formula for fixing the daily midpoint for the yuan-dollar exchange rate, increased offshore RMB interbank lending rate and the large-scale issuance of offshore central bank bills have all conveyed a clear signal of stabilising the yuan, the newspaper said. Though the PBOC’s goal is not to keep the yuan against the U.S. dollar at a certain level, but to focus on stabilising expectations and smoothing fx settlement and sales, the Times added.
China’s CPI is expected to fluctuate with the recovery of domestic demand and food price cycles in 2025, with the median likely being 1%, 21st Century Business Herald reported citing Ming Ming, chief economist of CITIC Securities, after 2024 CPI came in at 0.2% y/y. PPI is also expected to rebound on a yearly basis, following the 2.2% fall in 2024, Ming added. Given Q4’s price performance, the GDP deflator may remain negative for the seventh quarter, signaling great price pressure and necessity for increased countercyclical adjustments, the newspaper said citing Wen Bin, chief economist of China Minsheng Bank.
Indebted Chinese developer Country Garden has proposed restructuring terms that aims to reduce its offshore debt by up to USD11.6 billion and extend debt maturity by a maximum of 11.5 years, Yicai.com reported citing the company statement. The restructuring would help reduce the weighted average cost of borrowing from about 6% to about 2% per year. The developer has reached an understanding with a lender group made up of seven banks which holds 48% of the company’s outstanding syndicated loans totalling USD3.6 billion. By end-2023, Country Garden's total overseas interest-bearing liabilities were about USD16.4 billion, the newspaper said.