MNI China Daily Summary: Friday, November 17

EXCLUSIVE: The People’s Bank of China (PBOC) is considering a new tool to provide at least CNY1 trillion in liquidity for lenders to roll over or swap debt raised by local-government funding vehicles, which have become a potential source of financial-system instability, policy advisors and bank officials told MNI.

PREVIEW: China’s reference lending rate will likely remain unchanged in November as pressure on the yuan persists, while a recent significant net injection of medium-term lending facility (MLF) funds will lower the chance of a cut to the reserve requirement ratio, economists told MNI. The loan prime rate (LPR), based on the rate on the PBOC’s MLF and quotes submitted by 18 banks, is expected to remain steady at 3.45% for the one-year maturity and 4.2% for the over-five-year maturity next Monday.

LIQUIDITY: The PBOC conducted CNY352 billion via 7-day reverse repo, with the rate unchanged at 1.80%. The operation has led to a net injection of CNY149 billion after offsetting the maturity of CNY203 billion reverse repos today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 2.0189% from 2.0401% on Thursday, Wind Information showed. The overnight repo average fell to 1.8858% from the previous 1.9004%.

YUAN: The currency slightly strengthened to 7.2465 against the dollar from 7.2515 on Thursday. The PBOC set the dollar-yuan central parity rate higher at 7.1728 on Friday, compared with 7.1724 set on Thursday. The fixing was estimated at 7.2500 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bond was last at 2.6825%, down from Thursday's close of 2.6900%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.11% to 3,054.37 while the CSI300 index edged down 0.12% to 3,568.07. Hang Seng Index lost 2.12% to 17,454.19.

FROM THE PRESS: China believes the EU's anti-subsidy probe into the Chinese EV industry has not followed applicable WTO and EU laws, according to He Yadong, spokesperson for the Ministry of Commerce. He said the EU had only sampled three Chinese firms and excluded EU firms with high production and sales volume, a move designed to distort the results of the investigation. China has urged officials to abide by WTO rules.

China’s National Development and Reform Commission (NDRC) considers domestic demand and bulk consumption expansion its number one aim over the next period, according to NDRC spokesperson Li Chao. Speaking with reporters, Li said the state central planner will continue to implement macro policies such as issuing the new CNY1 trillion treasury bonds and promoting elderly care, childcare and other service facilities in urban communities. Li noted China’s PMI index declined in October but had been prosperous for several months prior.

The State Administration of Foreign Exchange will promote the revision of laws and regulations on overseas listings and foreign institutional investors' investment in domestic securities markets, according to an article published on its website. The administration will strive to improve the quality of capital account opening and attract more foreign financial institutions and long-term capital to develop business in China.