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EXCLUSIVE: A surge in issuance of special-purpose bonds by Chinese local
governments as national authorities urge an increase in infrastructure spending
brings a growing risk of defaults due to a shortage of suitable projects
providing reliable revenue streams for the securities, policy advisors told MNI.
Special-purpose bond issuance could jump to CNY3.35 trillion in 2020, equivalent
to 3.2% of GDP, according to China International Capital Corporation estimates.
This compares to the national government's 2.8% deficit ceiling for 2019.
POLICY: China said Monday it has suspended reviews of requests for U.S.
military ships and aircraft visiting Hong Kong as a response to President Donald
Trump's signing the legislation backing protesters in Hong Kong. China will also
sanction some U.S. non-governmental organizations including the National
Endowment for Democracy, Human Rights Watch and Freedom House for supporting
"extremist and violent activities" in Hong Kong, Hua Chunying, a spokeswoman for
the Ministry of Foreign Affairs, said at a regular briefing.
POLICY: The People's Bank of China (PBOC) won't pursue a zero-interest rate
policy or quantitative easing, but will maintain normal monetary policies for as
long as possible, Governor Yi Gang said at the weekend. The central bank will
stick to prudent monetary policy, implement countercyclical adjustments and
maintain "reasonably sufficient" liquidity, Yi said in an article published
online by Qiushi on Sunday.
POLICY: China should set next year's GDP growth target at between 5.5% and
6% and refrain from ensuring a minimum 6% hard target, according to Liu
Yuanchun, an advisor to the State Council and a vice president of Renmin
University. Instead, policymakers should maintain a strategy of transforming the
economy through high-quality growth, Liu told the China Macroeconomy Forum on
POLICY: China's campaign to push lenders to support the real economy in the
hope of boosting growth carries risks, Wu Xiaoqiu, an influential Chinese
economist and vice president at Renmin University, said Saturday. Top-down
administrative pressure to give life-support to ailing industries, such as coal
mining, places banks at greater risks and violates free market principles, Wu
told a conference at the school, an institution that serves as a think tank to
DATA: China's Purchasing Manager Index (PMI) unexpectedly rose to 50.2 in
November, rising from October's 49.3, higher than 49.5 expected by economists,
indicating that for the first time in six months manufacturing returned to
growth, data released Sunday showed.
DATA: The Caixin China manufacturing PMI rose for the fifth consecutive
month to 51.8 in November from October's 51.7. The index moved further into the
expansionary zone above the breakeven 50 and hit the highest level since 2017.
Improved demand drove manufacturers to expand production and led to increased
output, Caixin said.
LIQUIDITY: The PBOC skipped open market operations for the ninth day,
leaving liquidity unchanged as no reverse repos mature today, according to Wind
Information. The total liquidity in the banking system is relatively high, the
RATES: The seven-day weighted-average interbank repo rate for depository
institutions (DR007) decreased to 2.3775% from Friday's close of 2.5765%, Wind
Information showed. The overnight repo average rose to 2.2249% from Friday's
YUAN: The yuan weakened to 7.0449 against the U.S. dollar from Friday's
close of 7.0261. PBOC set the dollar-yuan central parity rate lower at 7.0262,
compared with Friday's 7.0298.
BONDS: The yield on 10-year China Government Bond was last at 3.2100%, up
from Friday's close of 3.1710%, according to Wind Information.
STOCKS: The Shanghai Composite Index gained 0.13% to 2,875.81. Hang Seng
Index rallied 0.37% to 26,444.72.
FROM THE PRESS: Market sentiment on the Chinese economy's prospects for
2020 was "cautiously optimistic", as looser monetary policies around the globe
had increased international capital inflows into China and helped improve
liquidity and corporate financing, the PBOC-run Financial News reported citing a
report by the Bank of China. The recovery in car sales will further consolidate
the contribution of consumption to economic growth, the newspaper said.
China may focus on boosting consumption and infrastructure in rural areas
in a bid to expand domestic demand, the Economic Information Daily reported
citing experts. The current per capita spending of 560 million farmers is only
47% of that of an urban resident. The consumption could be boosted by several
hundred billion yuan each year with the ongoing promotion of urbanization, the
newspaper said citing Chen Yajun, head of strategy and planning at the National
Development and Reform Commission.
China has approved the securitisation of non-performing assets by rural
commercial banks, the Shanghai Securities News reported. Banks in China has
issued 87 securities backed by non-performing assets since 2016, worth combined
CNY 55.38 billion, the newspaper said.
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