MNI China Daily Summary: Monday, December 23
EXCLUSIVE: China’s steel demand is anticipated to fall in 2025 to under 100 million tonnes, as fiscal stimulus targets consumption and the real-estate market continues to decline, local analysts told MNI, adding manufacturing strength will partially offset the weakness.
LIQUIDITY: The People's Bank of China (PBOC) conducted CNY109.6 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY643.5 billion after offsetting the maturity of CNY753.1 billion today, according to Wind Information.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.5395% from 1.5713%, Wind Information showed. The overnight repo average decreased to 1.3134% from 1.4153%.
YUAN: The currency weakened to 7.2988 against the dollar from 7.2985 on Friday. The PBOC set the dollar-yuan central parity rate lower at 7.1870 on Monday, compared with 7.1901 set on Friday. The fixing was estimated at 7.2901 by Bloomberg survey today.
BONDS: The yield on 10-year China Government Bonds was last at 1.6800%, down from the previous close of 1.7150%, according to chinamoney.com.cn.
STOCKS: The Shanghai Composite Index edged down 0.50% to 3,351.26 while the CSI300 index increased 0.15% to 3,933.57. The Hang Seng Index rose 0.82% to 19,883.13.
FROM THE PRESS: The PBOC is likely to cut the reserve requirement ratio by 0.25-0.5 percentage points by year-end to release up to CNY1 trillion long-term funds, which will also meet the liquidity needs during the Chinese New Year in January, National Business Daily reported citing Wang Qing, analyst at Golden Credit Rating. Under the tone of “moderately loose” monetary policy, the PBOC is expected to cut the policy interest rate by 0.5 pp in 2025, higher than 2024’s 0.3 pp cut, said Wang, noting that this will guide down Loan Prime Rate quotations. The interest rates of various structural monetary tools will also be lowered in due course, Wang added.
China should take all necessary measures to boost consumption next year including increasing financing support for the real economy and implementing fiscal subsidies and tax incentives, Yicai.com reported, citing Wang Zhongmin, former vice chairman at National Council for Social Security Fund. Authorities should prioritise consumption over investment by allocating additional funds to promote consumer spending, said Yang Weimin, deputy director of the Economic Affairs Committee of the 13th CPPCC National Committee, adding that it is also necessary to substantially boost income of low-income groups and increase policy support for consumer-related industries.
The issuance of panda bonds and dim sum bonds are expected to keep growing in 2025, amid large maturities of Chinese companies’ overseas debt and the PBOC’s moderately loose monetary policy stance, Securities Times reported citing market insiders. The issuance of panda bonds reached CNY194.8 billion as of Dec 19, a rise of 26% y/y, which is expected to hit a record high by year-end. Among the issuers, foreign investors were about three times the volume of last year, and Germany has topped panda bond issuance outside of Hong Kong, the newspaper said.