MNI China Daily Summary: Friday, January 3
POLICY: China will expand the scope of its consumer trade-in scheme from whitegoods to electronic devices, subsidising the purchase of mobile phones, tablets, and smart watches, CCTV News reported citing an official from the National Development and Reform Commission.
LIQUIDITY: The People's Bank of China (PBOC) conducted CNY19.3 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY88.5 billion after offsetting the maturity of CNY107.8 billion today, according to Wind Information.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.6818% from 1.6741% on Thursday, Wind Information showed. The overnight repo average increased to 1.6208% from 1.5526%.
YUAN: The currency weakened to 7.3093 against the dollar from 7.2994 on Thursday. The PBOC set the dollar-yuan central parity rate lower at 7.1878, compared with 7.1879 set on Thursday. The fixing was estimated at 7.3202 by Bloomberg survey today.
BONDS: The yield on 10-year China Government Bonds was last at 1.6350%, up from Thursday's close of 1.6125%, according to chinamoney.com.cn.
STOCKS: The Shanghai Composite Index tumbled 1.57% to 3,211.43, while the CSI300 index fell 1.18% to 3,775.16. The Hang Seng Index was up 0.70% at 19,760.27.
FROM THE PRESS: The PBOC may cut the reserve requirement ratio in Q1 by about 0.5 percentage points to release CNY1 trillion, to help ease banks’ pressure on increasing deposits and support their credit supply, Yicai.com reported citing Wang Qing, analyst at Golden Credit Rating. The reason why PBOC skipped an RRR cut in December is that it had injected a total CNY2 trillion medium- and long-term liquidity into the banking system via CNY1.4 trillion of outright reverse repos, CNY300 billion of net purchase of treasuries, and CNY300 billion of medium-term lending facility (MLF), far exceeding the maturity of CNY1.45 trillion MLF, the newspaper said.
The yuan is likely to remain basically stable at an equilibrium level in 2025, supported by the country’s good economic fundamentals, exchange rate management tools and improved resilience of its forex market, China Securities Journal reported citing Wen Bin, chief economist of Minsheng Bank. The pending forex settlement accumulated by Chinese exporters will also help to stabilize the yuan, the newspaper said citing Lu Zhe, chief economist of Soochow Securities.
China will further increase funding support for the consumer trade-in scheme which encourages the replacement of whitegoods, and expand the scheme to include various types of goods, Xinhua News Agency reported citing Premier Li Qiang. It is necessary to optimise and provide one-stop services for recycling old products and installing new products to facilitate consumption, Li added.