MNI China Daily Summary: Friday, October 13

EXCLUSIVE: China has sufficient monetary and fiscal firepower to avoid a 1990’s Japan-style decline and recession, which it can deploy to stabilise the property sector gradually without triggering a sharp house-price correction, a senior policy advisor told MNI.

DATA: New loans grew by CNY2.31 trillion from CNY1.36 trillion, though underperforming the CNY2.5 trillion expectation. Total social financing soared by CNY4.12 trillion, compared with CNY3.12 trillion in August, beating the market consensus of CNY3.75 trillion. M2 money supply slowed for the seventh consecutive month to 10.3% y/y, the lowest level since March 2022 (9.7%), compared to August's 10.6% and the 10.6% estimate.

DATA: CPI was 0.0% in September, compared with a 0.2% market consensus and down from August's 0.1% print, data from the National Bureau of Statistics showed Friday. The PPI declined 2.5% y/y, narrowing from August's 3.0% drop, though underperforming the consensus of a 2.4% decline.

DATA: China's exports decreased by 6.2% y/y in September, marking the fifth monthly fall after August's 8.8% y/y drop, despite beating consensus of a 7.5% y/y fall, data from Customs showed. Imports decreased 6.2% y/y against August's 7.3% y/y fall, the seventh consecutive monthly drop, driven by falling commodity prices. The market had expected a 6.0% y/y fall.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY95 billion via 7-day reverse repo, with the rate unchanged at 1.80%. The operation has led to a net injection of CNY95 billion as no reverse repos matures today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.8833% from 1.9525% on Thursday, Wind Information showed. The overnight repo average fell to 1.7351% from the previous 1.7972%.

YUAN: The currency slightly weakened to 7.3040 against the dollar from 7.2941 on Thursday. The PBOC set the dollar-yuan central parity rate lower at 7.1775, compared with 7.1776 set on Thursday. The fixing was estimated at 7.3172 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bond was last at 2.7200%, down from Thursday's close of 2.7375%, according to Wind Information.

STOCKS: The Shanghai Composite Index fell 0.64% to 3,088.10 while the CSI300 index lost 1.05% to 3,663.41. Hang Seng Index tumbled 2.33% to 17,813.45.

FROM THE PRESS: China will continue to reduce reasonably the negative list for foreign investment access and study the feasibility of further canceling or relaxing restrictions on foreign equity ratios, said He Yadong, spokesman at the Ministry of Commerce. Chen Jianwei, professor at the University of International Business and Economics, expects modern services and advanced manufacturing industries to benefit, such as financial services, vocational education, medical and health, alogside high-end equipment and biomedicine. The government has reduced the 2021 version of the negative list to 31 items, while further relaxation on foreign equity ratios in software and information technology is possible, said Xiao Benhua, deputy head at the FTZ research institute with the Shanghai Lixin University of Accounting and Finance. (Source: Securities Daily)

Local governments have begun to prepare special bond projects in 2024 and they are allowed to expand the use of such bonds to invest in urban village renovation and affordable housing. The amount of new special bonds next year may be around CNY3.5 trillion and if 10% of it were prioritised to support these two areas, it could bring about CNY400 billion. Previously, special bond funds were forbidden to use in real estate-related fields, debt replacement and projects that can be fully commercialised. (Source: 21st Century Business Herald)

Panda-bond issuance has grown rapidly this year, supported by the economic recovery, lower financing costs, increased varieties and rising demand for yuan assets, said Fan Ruoying, researcher at Bank of China Research Institute. A total of 73 panda bonds totaling CNY126.4 billion were issued as of Oct 12, which exceeded 2022's volume with 52 bonds totaling CNY85 billion, a rise of 62% y/y. Authorities will likely improve the efficiency of registration and issuance, including the introduction of a regular issuance plan for panda bonds, said Tian Huimin, commentator at Beijing Reform and Development Research Association. The return of red-chip companies can also help promote the expansion of the panda-bond market, said Tian. (Source: Securities Daily)