MNI China Daily Summary: Monday, December 9
POLICY: China will implement a more proactive fiscal policy and a moderately loose monetary policy in 2025 to boost domestic demand and stabilize both property and stock markets, according to a Political Bureau meeting.
DATA:China's Consumer Price Index rose 0.2% y/y in November, slowing for the third straight month from October's 0.3% and reaching a five month low, underperforming expectations by 20 basis points, while core CPI continued to rebound to 0.3%, data from the National Bureau of Statistics showed. PPI declined 2.5% y/y, narrowing from last month’s 2.9% fall and marking the 26th consecutive negative read, beating the market consensus of a 2.8% fall.
LIQUIDITY: The People's Bank of China (PBOC) conducted CNY47.1 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY13.8 billion after offsetting the maturity of CNY33.3 billion today, according to Wind Information.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.7790% from 1.6626%, Wind Information showed. The overnight repo average increased to 1.5246% from 1.4934%.
YUAN: The currency weakened to 7.2760 against the dollar from 7.2582 on Friday. The PBOC set the dollar-yuan central parity rate higher at 7.1870 on Monday, compared with 7.1848 set on Friday. The fixing was estimated at 7.2614 by Bloomberg survey today.
BONDS: The yield on 10-year China Government Bonds was last at 1.9525%, up from the previous close of 1.9500%, according to chinamoney.com.cn.
STOCKS: The Shanghai Composite Index edged down 0.05% to 3,402.53 while the CSI300 index decreased 0.17% to 3,966.57. The Hang Seng Index rallied 2.76% to 20,414.09.
FROM THE PRESS: The real-estate market requires a combination of long- and short-term measures to bottom out, aimed at digesting housing inventory and delivery, and releasing potential demand, said the Party-run People’s Daily in a commentary. The market faced structural problems as high home prices and a shortage of affordable housing pressured new citizens and young people in big cities, with the supply of upgrading also falling short of the markets' requirement. Policymakers' promotion of urbanisation will release further demand in the future, the Paper said.
China must accelerate structural transformation towards domestic demand to best deal with a second Donald Trump presidency, according to Zhu Min, vice chairman at the China Centre for International Economic Exchanges and former deputy managing director at the IMF. Zhu, speaking at a recent forum, said policymakers should also expand and strengthen the manufacturing industry, noting the economy will stand firm over the next 20 years if the sector provides cheap, good and high-tech products.
The PBOC has maintained reasonable market liquidity through new policy tools such as the open-market trading of treasury bonds and outright reverse repos, which saw net purchases of CNY500 billion from August to October, and CNY800 billion in November respectively, making a short-term reduction of the reserve requirement ratio less likely, according to Guan Tao, a former director at the State Administration of Foreign Exchange.