MNI China Daily Summary: Friday, November 18

EXCLUSIVE: The People’s Bank of China is expected to boost credit growth by cutting the reserve requirement ratio and guiding down reference lending rates before the end of the year, though the use of targeted tools has limited the prospect of across-the-board easing, economists and policy advisers said.

POLICY: China should target growth of no less than 5% in 2023 and aim to shake off Covid impacts in H1 next year with pro-growth measures and reforms, as persistently lower growth could threaten the achievement of the country's 2035 goal, said Liu Shijin, deputy director of the Economic Affairs Committee, Chinese People’s Political Consultative Conference at a forum.

POLICY: China's policymakers should increase support to boost consumption and enhance public welfare rather than just focus on infrastructure investments that aren't sustainable and a key driver of growth, said Huang Yiping, economics professor at Peking University and former member of the People's Bank of China (PBOC) monetary policy committee.

POLICY: China’s financial regulators should unveil standards for energy transition financing of carbon-intensive sectors and information disclosure requirements as soon as possible to guide institutions and attract private investors, said Ma Jun, Chairman of the Green Finance Committee of the China Society for Finance and Banking.

LIQUIDITY: The PBOC injected CNY21 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 CNY12 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 1.7213% from 1.8630% on Thursday, Wind Information showed. The overnight repo average fell to 1.3195% from the previous 1.6648%.

YUAN: The currency strengthened to 7.1275 against the dollar from 7.1291 on Thursday. The PBOC set the dollar-yuan central parity rate higher at 7.1091, compared with 7.0655 set on Thursday.

BONDS: The yield on 10-year China Government Bonds was last at 2.8250%, up from Thursday's close of 2.7875%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.58% to 3,097.24 while the CSI300 index lost 0.45% to 3,801.57. The Hang Seng Index fell 0.29% to 17,992.54.

FROM THE PRESS: The PBOC is less likely to cut reserve requirement ratios or interest rates by the end of the year, as it watches for signs of rising inflation as flagged in its Q3 Monetary Policy Report, Securities Daily reported citing Wang Qing, chief analyst of Golden Credit Rating. The PBOC also left out its previous comments about “giving full play to the dual roles of aggregate and structural monetary policy tools” in the Q3 report. Li Chao, chief economist at Zheshang Securities believes this signals a marginal tightening of liquidity. He said PBOC would give more attention to financial stability, which includes avoiding funds circulating within the financial sector without entering the real economy, and stabilising exchange rate and balance of payments, the newspaper said.

China needs to be vigilant and avoid high inflation as M2 growth has been relatively high over the past two years and pressure from imported inflation remains, said 21st Century Business Herald in an editorial. The PBOC said in its Q3 Monetary Policy report that it will monitor the potential for rising inflation, which is possible amid changing global conditions. The Ukraine conflict has disturbed global energy supply and developed economies face persistent high inflation. Though domestic prices have been tamed by weak demand as the Chinese economy continues to recover, China should learn from the U.S. experience where exploding demand demand and excess cheap liquidity provided a hotbed for high inflation, the newspaper said.

Property developers are accelerating the delivery of unfinished housing projects, though they still remain cautious about kicking off new projects amid sluggish demand, Caixin reported. The decline in completed projects had been narrowing rapidly on a year-on-year basis. On a month-on-month perspective, the completed areas increased by 41.5% in October, showing signs of stabilization, Caixin said. The delivery of completed homes will continue to accelerate following recent measures to help ease developers’ financing pressures, the newspaper said.