MNI China Daily Summary: Monday, February 1

EXCLUSIVE: China should maintain the scale of local government special bond issues around last year's level as a buffer against lingering economic uncertainties and to support projects affected by the pandemic even as it withdraws some other stimulus measures such as special treasury bonds, a special researcher to the State Council told MNI.

DATA: The Caixin China PMI for January dropped 1.5 points to 51.5 from the previous month, to the lowest level since July 2020, indicating a slower recovery in manufacturing activities, according to publisher Caixin in an email sent Monday.

DATA: China's January manufacturing Purchasing Manager Index dropped to 51.3 from 51.9 for the previous month, as the incoming Chinese New Year holiday and the recent virus outbreaks slowed activities, the National Bureau of Statistics said on Sunday. It was the 11th month that the gauge remained above the breakeven 50.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY100 billion via 7-day reverse repos with the rate unchanged today. This resulted in a net injection of CNY98 billion after the maturity of CNY2 billion reverse repos today, according to Wind Information. The operation aims to keep the liquidity in the banking system reasonable and ample, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 3.1656% from the 3.1587% on Friday, Wind Information showed. The overnight repo average fell to 2.7533% from the previous 3.3334%.

YUAN: The currency weakened to 6.4641 against the dollar from 6.4612 on Friday. The PBOC set the dollar-yuan central parity rate lower at 6.4623 today. This compares with the 6.4709 set on Friday.

BONDS: The yield on 10-year China Government Bond was last at 3.2200%, flat from the close of Thursday, according to Wind Information.

STOCKS: The Shanghai Composite Index increased 0.64% to 3,505.28 while the CSI300 index gained 1.23% to 5,417.65. Hang Seng Index rallied 2.15% to 28,892.86.

FROM THE PRESS: China should cap this year's issuance of local govt bonds at CNY3 trillion and focus on resolving risks in previously issued debts, the Securities Daily reported citing Zhang Yiqun, a member of the Society of Public Finance. China should establish the scope and usage of government financing bonds while providing policy tools to help transform existing debts, the Daily said citing Zhang.

More Chinese cities, particularly those with fast-rising home prices, are likely to further tighten housing regulations, the China Securities Journal reported citing analysts. Mortgage approvals may also be tightened as easing monetary policies are withdrawn, the newspaper said. Some banks are tightening quotas, delaying lending, and even raising mortgage rates, reflecting regulators' hardening stance on containing bubbles and controlling risks in the real estate market, the newspaper said.

China will step up protection of its intellectual property (IP) rights including enhancing the legal system to promotes awareness, as doing so will ensure future development, President Xi Jinping wrote in the QiuShi Magazine. China will protect its national security while increasing international collaboration and competition in the field of IP, said Xi.