MNI China Daily Summary: Friday, November 11

TOP NEWS: China has shortened Covid-19 quarantine requirements for inbound travelers to eight days from 10 days, Xinhua News Agency reported citing a document with 20 measures to optimise Covid controls released. Arrivals will now spend five days in a quarantine facility and a further three days at home, compared to the current seven days of quarantine in a hotel room followed by three days of health monitoring at home.

EXCLUSIVE: A recent yuan rally looks set to reverse as export headwinds mount and amid signs the People’s Bank of China (PBOC) has reduced to use its so-called “counter-cyclical factor” in daily fixings, policy advisors and currency experts told MNI, anticipating a more volatile and broader trading range during the rest of the year.

EXCLUSIVE: China’s growth will slow to 2-3% despite hopes for a robust rebound once Covid restrictions are relaxed, as the nation’s new leadership confront a legacy of too much debt and a bumpy transition to consumption-led growth, Beijing University professor Michael Pettis told MNI.

POLICY: Chinese President Xi Jinping will hold bilateral meetings with U.S. President Joe Biden and French President Emmanuel Macron at upcoming international meetings, Xinhua News Agency reported. A Ministry of Foreign Affairs spokesperson confirmed Xi will attend the 17th G20 Summit in Bali, Indonesia from November 14 to 17.

LIQUIDITY: The PBOC injected CNY12 billion via 7-day reverse repos with the rates unchanged at 2.00%. The operation led to a net injection of CNY9 billion after offsetting the maturity of CNY3 billion reverse 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) decreased to 1.8220% from 1.8861% on Thursday, Wind Information showed. The overnight repo average fell to 1.6956% from the previous 1.8135%.

YUAN: The currency strengthened to 7.1106 against the dollar from 7.2474 on Thursday. The PBOC set the dollar-yuan central parity rate lower at 7.1907, compared with 7.2422 set on Thursday.

BONDS: The yield on 10-year China Government Bonds was last at 2.7350%, up from Thursday's close of 2.6875%, according to Wind Information.

STOCKS: The Shanghai Composite Index rallied 1.69% to 3,087.29 while the CSI300 index gained 2.79% to 3,788.44. The Hang Seng Index jumped 7.74% to 17,325.66.

FROM THE PRESS: The sharp falls in China’s October credit and aggregate finance data indicate weak financing demand and that counter-cyclical policies need to be strengthened to promote credit expansion in infrastructure, manufacturing and real estate, Yicai.com reported citing analysts. Aggregate Finance grew CNY907.9 billion in October, CNY709.7 billion yuan less than the same period last year, mainly dragged down by sluggish new yuan loans and government bond financing, Yicai said. The credit easing process has slowed down amid repeated disruptions of production and consumption by Covid outbreaks, while slowing inflation should open up policy space for stabilising growth, the newspaper said analysts.

The PBOC may consider a small reserve requirement ratio cut by the end of this year when a large amount of medium-term lending facility matures and drains liquidity, China Securities Journal reported citing analysts. There are CNY1 trillion and CNY500 billion of MLFs maturing in November and December, respectively, the newspaper said. Analysts believe the inflation peak has passed and CPI will continue to be within the price control target of 3% in Q4, which provides monetary easing space, the newspaper said. With overseas interest rate hikes slowing, it is expected the PBOC would launch RRR and interest rate cuts accordingly to expand credit and lower financing costs, the newspaper said citing analysts.

China should focus on fighting the epidemic in key areas by taking more resolute and decisive measures to quickly curb any spread and restore order as soon as possible, while also using more precise controls, Xinhua News Agency reported, citing the meeting of the Politburo Standing Committee on Thursday. China faces a severe situation as the outbreak could expand in winter and spring, making it necessary to unswervingly implement the general policy of dynamic “zero-Covid”, the meeting said.