MNI China Daily Summary: Tuesday, January 19

POLICY: The recent sporadic outbreaks of Covid-19 ahead of the Chinese New Year holiday will inevitably hit the consumer market and the National Development and Reform Commission will increase stimulus measures in response to lift residents' incomes and support spending, said Yan Pengcheng, director of the NDRC Comprehensive Department, at a briefing today.

POLICY: The People's Bank of China (PBOC) should extend programs providing credit support to small firms this year as these companies continue to face economic hardship, said Wang Yiming, a vice chairman with China Center for International Economic Exchanges, an official think tank. Fiscal spending in 2021 should remain strong enough to support the economy and monetary policy should aim to keep the macro-leverage ratio relatively stable, he said.

POLICY: The PBOC's Entrepreneur Macroeconomic Heat Index was at 34.4% for Q4 2020, up 6.7 points from the previous quarter and up 2.6 points on year ago levels, the central bank said on its website Tuesday. The Bankers Macroeconomic Heat Index was at 33.6%, up 8.0 points from Q3, with a higher index indicating the economy is picking up.

LIQUIDITY: The PBOC injected CNY80 billion via 7-day reverse repos with the rate unchanged. This resulted in a net injection of CNY75 billion given the maturity of CNY5 billion reverse repos today, according to Wind Information. The operation aims to maintain 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 2.3383% from 2.1777% for Monday, Wind Information showed. The overnight repo average increased to 2.2834% from the previous 2.1400%.

YUAN: The currency strengthened to 6.4872 against the dollar from 6.4930 Monday. The PBOC set the dollar-yuan central parity rate lower at 6.4833. This compares with the 6.4845 set on Monday.

BONDS: The yield on the 10-year China Government Bond was last at 3.2000%, down from Monday's 3.2150%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.83% to 3,566.38 while the CSI300 index lost 1.47% to 5,437.52. The Hang Seng Index rallied by 2.70% to 29,642.28.

FROM THE PRESS: China's economy still faces structural imbalance despite recording GDP of over 100 trillion yuan in 2020, the Securities Daily said in a commentary. The recovery in consumption needs to be further accelerated as retail sales fell 3.9% from the previous year. However, the recovery is forecast to gather more steam as the digital economy, the digitization of industries, transportation and logistics all enhance production and consumption, the newspaper said.

The U.S. dollar may enter a phase of weakness if vaccines help bring the pandemic under control and the market shifts to more risk-tolerant assets, the Financial News reported citing Guan Tao, chief economist at BOC International Securities and a former official at China's FX regulatory agency. The dollar will remain a critical global currency even as some observers want to reduce the risks of holding dollar-denominated assets exposed to U.S. government-imposed sanctions, the surging U.S deficit and poor governance, Guan said. The incoming U.S. administration is expected to embrace multilateralism, which may strengthen the dollar's global position, Guan told the newspaper.

China is adjusting its tariffs and making efforts it agreed to under the RCEP trade agreement, Shanghai Securities News reported citing Gao Feng, the spokesperson for the Ministry of Commerce. The Ministry will brief local governments, industry organizers and companies with obligations and development prospects under RCEP through various online trainings, said Gao.