MNI China Daily Summary: Monday, February 17
EXCLUSIVE: The People’s Bank of China should enhance facilities supporting the nation’s stock markets and target stable asset prices, as traditional monetary policy loses effectiveness with inflation at very low levels, a prominent economist who advises the central bank told MNI in an interview.
LIQUIDITY: The PBOC conducted CNY190.5 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY38.5 billion after offsetting the maturity of CNY229 billion today, according to Wind Information.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 2.0567% from 1.9412%, Wind Information showed. The overnight repo average increased to 1.9386% from 1.9135%.
YUAN: The currency strengthened to 7.2592 against the dollar from 7.2654 on Friday. The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1702, compared with 7.1706 set on Friday. The fixing was estimated at 7.2653 by Bloomberg survey today.
BONDS: The yield on 10-year China Government Bonds was last at 1.6500%, up from the previous close of 1.6300%, according to chinamoney.com.cn.
STOCKS: The Shanghai Composite Index edged up 0.27% to 3,355.83 while the CSI300 index increased 0.21% to 3,947.40. The Hang Seng Index fell 0.02% to 22,616.23.
FROM THE PRESS: The People’s Bank of China is expected to prioritise structural tools including the Reserve Requirement Ratio over aggregate tools such as interest rate cuts in 2025, as the central bank remains concerned over banks’ net interest margin, according to Guan Tao, former senior official at the State Administration of Foreign Exchange. A downward trend in bank liability costs may be a leading indicator for central bank interest rate cuts this year, Guan added. Chinese banks earn more than 70% of operating income from interest, unlike U.S. and European banks which earn around half, Guan observed.
Residents’ credit demand remained weak in January despite corporate activity driving new yuan loans to a record high of CNY5.13 trillion, Yicai.com reported, citing analysts. While enterprise loans increased by CNY920 billion when compared to Jan 2024, household loans saw a year-on-year decrease of CNY536 billion, mainly due to mediocre home sales, while the reduction in outstanding mortgage rates also significantly reduced demand for business loans to replace mortgages, Yicai said citing Huaxi Securities analyst Xiao Jinchuan.
Several Chinese financial institutions announced plans to transfer shares to Central Huijin Investment to make the sovereign fund company a controlling shareholder, Economic Information Daily reported. Among the five, three are national asset management companies, including China Cinda, China Orient and China Great Wall, as well as China Securities Finance and China Agricultural Reinsurance. The transfer of equity aims to optimise the governance structure of state-owned financial institutions, strengthen the centralised management of state-owned capital and the ability to integrate resources, and avoid deviating from their core business, the newspaper said citing Zeng Gang, director of the Shanghai Institution For Finance and Development.