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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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Free AccessMNI China Daily Summary: Monday, Dec 20
POLICY: China needs to expand fiscal and monetary policy options into next year to stimulate credit demand in a bid to boost GDP growth above 5%, a former senior advisor to the People’s Bank of China told MNI.
BRIEF: The PBOC lowered its one-year benchmark Loan Prime Rate (LPR) by 5 basis points on Monday, in a move that is largely expected by the market following a second RRR cut this year that took place this month. The five-year LPR was kept unchanged at 4.65%, according to a statement on the central bank's website.
LIQUIDITY: The PBOC injected CNY10 billion via 7-day reverse repos and CNY10 billion via 14-day reverse repo with the rate unchanged at 2.2% and 2.35% respectively on Monday. This operation has injected net CNY10 billion after offsetting the maturity of CNY10 billion repos today, according to Wind Information.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 2.1025% from the close of 2.1143% on Friday, Wind Information showed. The overnight repo average rose to 1.9756% from the previous 1.8411%.
YUAN: The currency weakened to 6.3781 against the dollar from 6.3742 on Friday. The PBOC set the dollar-yuan central parity rate higher at 6.3933, compared with 6.3651 set on Friday.
BONDS: The yield on the 10-year China Government Bond was last at 2.8880%, down from 2.8900% of Friday's close, according to Wind Information.
STOCKS: The Shanghai Composite Index lost 1.07% to 3,593.60, while the CSI300 fell 1.50% to 4,880.42. The Hong Kong's Hang Seng Index dropped 1.93% to 22,744.86.
FROM THE PRESS: China will welcome next year’s CPC 20th Congress with “exceptional result” by upholding a stable and healthy economic environment, peaceful social environment and clean and just political environment, the People’s Daily said in an editorial on its homepage. China has many macroeconomic tools and large policy space at disposal, such as the 0.5 pp RRR cut and CNY1.46 trillion special-purpose bonds introduced since December, said the daily, which also touted the country’s economic achievements this year. China must seek progress while maintaining stability, prevent large economic swings, and ensure different policies are coordinated, said the CPC's official newspaper.
The PBOC’s benchmark Loan Prime Rate has a significant probability of getting cut, the Securities Times said in a commentary. The central bank has made the signal when it said policies are to be forward-looking and targeted and that it wants to realize the potential of a market-determined loan rate, said the newspaper. Policy loosening and banks’ lower costs of capital will have allowed banks to submit lower LPR bids, serving to reduce companies’ loan costs in place of a policy rate cut, said the newspaper.
China faces limited impact from the imminent tightening policies by the Federal Reserve even as the two governments’ bond yields continue to narrow, Guan Tao, the global chief economist at Bank of China International, wrote in the 21st Century Business Herald. The yuan continued to surge against the dollar despite two rounds of RRR cuts by the PBOC this year, lending evidence of the currency’s strength, said Guan, a former PBOC official. China has laid political support for faster growth next year, which will allow it to be more resilient to external impact, said Guan. China should allow the yuan’s exchange rate to be more flexible and have freer movement both ways, which helps absorb internal and external impacts, said Guan. To keep the exchange rates more stable, China should develop its forex market and further widen connections with external markets, Guan wrote.
To read the full story
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.