MNI China Daily Summary: Friday, November 10

EXCLUSIVE: Chinese authorities need to make it easier to delist underperforming companies and improve corporate governance if an official drive to boost the valuation of the country’s long-stagnant stock market is to succeed, policy advisors and economists told MNI.

EXCLUSIVE: China’s demand for crude oil imports will increase marginally in 2024 from this year’s 11 million bpd as economic growth firms and the government adds infrastructure stimulus, but this pose little significant upside risk to world oil prices, a leading China energy expert has told MNI.

POLICY: China should increase its fiscal efforts including raising the budget deficit-to-GDP ratio in 2024 to stabilise the economy in the short-term, although it must step up structural reforms to unleash medium- and long-term momentum, Wang Yiming, the People’s Bank of China (PBOC) Monetary Policy Committee member. The central government leverage ratio is about 21.4% in 2022, the lowest among major economies, leaving large room for further increase, Wang told the 14th Caixin Summit in Beijing.

POLICY: China still has huge potential for economic growth as it still has a late-mover advantage, continuous reforms are needed for greatest benefit, said Zhang Junkuo, former deputy director of the Development Research Center of the State Council. “The current weak recovery cannot simply be attributed to a decline in growth potential,” said Zhang.

LIQUIDITY: The PBOC conducted CNY203 billion via 7-day reverse repo, with the rate unchanged at 1.80%. The operation has led to a net injection of CNY160 billion after offsetting the maturity of CNY43 billion reverse repos today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.8470% from 1.8367% on Thursday, Wind Information showed. The overnight repo average rose to 1.6902% from the previous 1.6477%.

YUAN: The currency slightly weakened to 7.2906 against the dollar from 7.2850 on Thursday. The PBOC set the dollar-yuan central parity rate lower at 7.1771, compared with 7.1772 set on Thursday. The fixing was estimated at 7.2947 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bond was last at 2.6825%, down from Thursday's close of 2.6875%, according to Wind Information.

STOCKS: The Shanghai Composite Index fell 0.47% to 3,038.97 while the CSI300 index edged down 0.73% to 3,586.49. Hang Seng Index lost 1.76% to 17,203.26.

FROM THE PRESS: The PBOC will promote the institutional opening of the financial market in a steady and orderly manner, according to an article published on its website. The central bank will further improve market access, increase yuan asset liquidity, enrich risk hedging tools, improve foreign exchange transaction convenience, and better meet asset allocation and risk management needs of global investors. Authorities will also support more overseas central banks, international development institutions, multinational enterprises to issue panda bonds.

China's 0.2% y/y fall in October CPI was mainly linked to declining pork prices, while high-frequency data showed the economy remained generally stable, according to He Xiaoshu, analyst at GF Securities. Auto sales continued to rise and subway passenger flows reflected active residential activity, He added. Pork prices fell 2% m/m, or 30.1% y/y in October amid sufficient supply and weak demand after the October holiday. Q4 pork prices may rebound seasonally but will not rise sharply given steady growth in hog production, said Chen Guanghua, an official from Ministry of Agriculture and Rural Affairs.

China’s Cross-border Interbank Payment System (CIPS) will expand its “circle of friends” for engaging in cross border yuan payments, according to a statement from the organisation. For next steps, CIPS will improve its user-centred approach, and continue to enrich the functionality of products and services. CIPS said 42 overseas direct users have been added so far in 2023, bringing total users to 1,481 across 182 countries and regions. Yicai news outlet noted CIPS remained open during the Mid-Autumn Festival and National Day holidays for the first time this year, and in H1 domestic and foreign users made 24.5 trillion yuan of cross-border yuan receipts and payments, up 20% y/y.