MNI China Daily Summary: Monday, February 10
POLICY: China’s State Council announced that Zou Lan, head of the People's Bank of China Monetary Policy Department, has been appointed as Vice Governor of the country's central bank.
POLICY: The U.S. decision to charge an additional 25% tariff on steel imports will not have a significant impact on Chinese steel exports, which reached 110 million tonnes last year, a record high, analysts at Shanghai Steel Market said.
POLICY: China's Consumer Price Index rose 0.5% y/y in January, growing at the fastest pace in five months from December's 0.1% and beating an expectation of 0.4%, though weakness in factory-gate inflation persisted, data from the National Bureau of Statistics showed Sunday.
LIQUIDITY: The PBOC conducted CNY215 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY234 billion after offsetting the maturity of CNY449 billion today, according to Wind Information.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.8038% from 1.7304%, Wind Information showed. The overnight repo average increased to 1.8541% from 1.7897%.
YUAN: The currency weakened to 7.3077 against the dollar from 7.2889 on Friday. The PBOC set the dollar-yuan central parity rate higher at 7.1707, compared with 7.1699 set on Friday. The fixing was estimated at 7.3017 by Bloomberg survey today.
BONDS: The yield on 10-year China Government Bonds was last at 1.6200%, up from the previous close of 1.5875%, according to chinamoney.com.cn.
STOCKS: The Shanghai Composite Index gained 0.56% to 3,322.17 while the CSI300 index increased 0.21% to 3,901.06. The Hang Seng Index edged up 1.84% to 21,521.98.
FROM THE PRESS: China’s foreign exchange reserves rose 0.2% m/m in January to USD3.2 trillion, benefiting from a stronger U.S. dollar index, falling treasury yields and increases in major stock indices, according to Guan Tao, former senior official at the State Administration of Foreign Exchange. The Yuan displayed strong resilience in January as the elasticity of two-way fluctuations increased and FX reserves remained stable, Guan added.
China’s customs department is likely to support export firms this year through favourable tax policies and by expanding the scope of cross-border e-commerce retail sales, according to Song Siyuan, associate researcher at the Ministry of Commerce. Authorities may increase logistics and customs clearance services, improve logistics efficiency and reduce costs, Song added. China’s export sector can benefit from a complete industrial system and an increasing number of trading partners, Song continued.
China’s CPI reached 0.5% y/y in January, the fastest rate in five months, driven by Spring Festival demand and authorities' new round of consumer trade-in scheme, according to Wen Bin, chief economist at Minsheng Bank. The temperature drop affected agricultural production, causing pork prices and fresh fruit and vegetables to rebound, Wen added. Looking ahead, PPI declines may narrow as strong exports and resumption in construction following the Spring Festival supports a recovery of domestic industrial product prices, following January's 2.3% fall, Wen said.