MNI China Daily Summary: Monday, December 18

EXCLUSIVE: China’s refreshed public-private partnership (PPP) regime will help stem the flow of falling private investment in 2024 by encouraging more active private-sector ownership of user-paid infrastructure and utilities, while curbing the growth of local government implicit debts, policy advisors and market analysts told MNI.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY184 billion via 7-day reverse repo and CNY60 billion via 14-day on Monday, with the rates unchanged at 1.80% and 1.95%, respectively. The reverse repo operation has led to a net drain of CNY41 billion reverse repos after offsetting CNY285 billion maturity today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.8419% from 1.7870%, Wind Information showed. The overnight repo average increased to 1.6074% from 1.5902%.

YUAN: The currency weakened to 7.1311 against the dollar from previous close of 7.0987. The PBOC set the dollar-yuan central parity rate lower at 7.0933, compared with 7.0957 set on Friday. The fixing was estimated at 7.1128 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.6475%, down from 2.6525% at the previous close, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.40% to 2,930.80, while the CSI300 decreased 0.36% to 3,329.37. The Hang Seng Index fell 0.97% to 16,629.23.

FROM THE PRESS: China will optimise the investment direction and quota allocation of local government special bonds and reasonably expand the scope of using such bonds as capital funds for infrastructure projects, Xinhua New Agency reported, citing the Office of the Central Financial Commission. Authorities will also develop new types of digital, green and healthy consumption, and actively promote spending on smart homes, entertainment and tourism, and sports events to drive related investments.

Foreign investors have continued to increase holdings of yuan bonds since Q3, with the inflows of USD33 billion in November, the second-highest monthly increase in history. Narrowing China-U.S. interest spreads alongside a 2.6% appreciation in the yuan against dollar supported the purchase of yuan bonds, said Yu Lifeng, senior analyst of Golden Credit Rating. The foreign allocation of yuan bonds is likely to keep rising as the end of Fed rate hikes will drive more funds to emerging markets, said Yu. The recovery of the Chinese economy will also play an increasingly supportive role in stabilising cross-border capital flows, said Wang Chunying, spokesperson of the State Administration of Foreign Exchange. (Source: Shanghai Securities News)

China will implement stronger regulation that targets the management of the non-banking payment industry, according to the State Council. The document, signed by Premier Li Qiang, clarified the definition and permissions of non-bank payment firms and strengthened customer protection against misuse of personal information or unspecified fees. Amongst other regulations, authorities will establish effective due diligence, strengthen risk management and stipulate legal liability. The State Council also said it would stop disguised forms of non-bank payments. (Source: 21st Century Business Herald)