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Free AccessMNI China Daily Summary: Friday, October 14
DATA: China's September consumer price index rose 2.8% y/y, accelerating from August's 2.5% to hit the highest level since April 2020, data from the National Bureau of Statistics showed. The producer price index eased for the 11th straight month to 0.9% y/y from August's 2.3% following declines in global crude oil prices. The figure was lower than the 1% forecast, and hit the lowest level since January 2021.
POLICY: China's lacklustre September core CPI highlighted weak domestic demand and the challenge confronting China’s policymakers as they seek to revive growth, an analyst said. Core CPI eased to a 0.6% y/y pace, a decrease of 0.2pp from August and the slowest pace since March 2021.
POLICY: The People's Bank of China (PBOC) Governor Yi Gang said the bank will provide "stronger" support for the real economy in a speech to a G20 meeting of finance ministers and central bank governors on Thursday. Yi said in the speech that the PBOC would maintain prudent monetary policy as prices were "basically stable" in China.
LIQUIDITY: The PBOC injected CNY2 billion via 7-day reverse repos with the rates unchanged at 2.00%. The operation led to a net drain of CNY56 billion after offsetting the maturity of CNY58 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 1.4751% from 1.5651% on Thursday, Wind Information showed. The overnight repo average fell to 1.1315% from the previous 1.1642%.
YUAN: The currency slightly weakened to 7.1931 against the dollar from 7.1928 on Thursday. The PBOC set the dollar-yuan central parity rate lower at 7.1088, compared with 7.1101 set on Thursday.
BONDS: The yield on 10-year China Government Bond was last at 2.7275%, down from Thursday's close of 2.7500%, according to Wind Information.
STOCKS: The Shanghai Composite Index rallied 1.84% to 3,071.99 while the CSI300 index rose 2.39% to 3,842.47. Hang Seng Index gained 1.21% to 16,587.69.
FROM THE PRESS: There is no reason for the yuan to continue to depreciate against the U.S. dollar over the longer term given the steady recovery of the Chinese economy, the Securities Daily reported, citing analysts after both the onshore and offshore yuan breached 7.19 on Thursday. The U.S. Dollar Index is likely to remain high in the short term on expectations of further rate hikes by the Federal Reserve, though the index may have limited upside, the newspaper said citing Zhao Qingming, vice president of the China Foreign Exchange Investment Research Institute. The yuan may fluctuate in a narrow range around 7.1 by the end of the year, the Daily said citing Pan Zhongning, head of International Business at China Asset Management.
China is likely to front-load a portion of the quota of next year’s infrastructure-back local government special bonds in Q4 to boost investment and stabilise economic growth, the China Securities Journal reported citing analysts. The allocation, most likely in November, could amount to CNY1.4-1.8 trillion given that front-loaded quotas all exceeded CNY1 trillion in previous years, the newspaper said citing Wang Yunjin, senior researcher of Zhixin Investment Research Institute. The fiscal boost may be directed into areas including transportation and logistics, water conservancy, municipal facilities and industrial parks, Wang was cited as saying. In the first three quarters of this year, the issuance of new special bonds exceeded CNY3.54 trillion, the newspaper added.
China must insist on its dynamic “zero-Covid” policy as there is no way to completely eliminate the virus and no guarantee of zero cases, Caixin reported citing Liang Wannian, head of an expert panel on the Covid-19 response affiliated with the National Health Commission speaking at a Thursday press conference. If Covid restrictions were relaxed it would inevitably cause a large number of infections, which could threaten the life of 267 million elderly people and a large number of patients with underlying diseases, said Liang. China still has the conditions to prevent any outbreaks, as current infections are mainly imported from overseas and China has strong organisational capabilities to carry out controls, said Liang.
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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.