MNI China Daily Summary: Tuesday, January 26

POLICY: China should permanently abolish the GDP growth target and focus on stabilizing employment and controlling inflation as the main goals for its macroeconomic policies, Ma Jun, a member of the Monetary Policy Committee of the People's Bank of China, said in a recent event hosted by the China Wealth Management 50 Forum. GDP should not be used as an indicator for evaluating the performance of local officials, even if it is useful for forecasting revenue and expenditure or projecting investment, said Ma.

POLICY: The People's Bank of China will not quit supportive policy too early and will keep its monetary policy consistent and stable, Governor Yi Gang said Tuesday at a World Economic Forum event. China's GDP growth rate will return to the normal range this year, which in line with expectations, Yi told the virtual meeting. In response to the question of whether Alibaba's financial arm, Ant Finance, would resume the public offering, Yi indicated that it would "be back on track" as long as the problem is solved and handled under the legal framework and procedures with extensive consultations with society.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY2 billion via 7-day reverse repos with the rate unchanged today. This resulted in a net drain of CNY78 billion given the maturity of CNY80 billion of reverse repos today, according to Wind Information. The operation aims to maintain the liquidity in the banking system at a reasonable and ample level, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 2.7851% from 2.4218% for Monday, Wind Information showed. The overnight repo average increased to 2.7746% from the previous 2.4955%.

YUAN: The currency strengthened to 6.4756 against the dollar from 6.4763 Monday. The PBOC set the dollar-yuan central parity rate higher at 6.4847 today. This compares with the 6.4819 set on Monday.

BONDS: The yield on the 10-year China Government Bond was last at 3.2125%, up from Monday's 3.1900%, according to Wind Information.

STOCKS: The Shanghai Composite Index lost 1.51% to 3,569.43 while the CSI300 index dropped 2.01% to 5,512.97. The Hang Seng Index tumbled 2.55% to 29,391.26.

FROM THE PRESS: China's local governments should focus on expanding domestic consumption and encouraging innovation so the economy can reach GDP growth targets of 6%-10%, the state-run Economic Information Daily reported. Local governments should adapt to the normalization of epidemic prevention, focus on developing the digital economy and boost investment through infrastructure programs, the newspaper reported citing Gao Ruidong, chief economist from Everbright Securities. The consumption potential of rural areas should be raised through increasing employment, public consumption and social security, Gao told the newspaper.

China should maintain its fiscal expenditure including maintaining the scale of local government special bonds, according to a report by the China Finance 40 Forum. Monetary policy should be maintained at the current neutral level, while the central bank should pay close attention to exposure to credit risks, the report noted. China should also promote structural reform in medical care and education, and increase housing and land supply in big cities, the report urged.

The GDP of China's southern Guangdong province rose 2.3% last year to CNY 11 trillion, ahead of the economies of Russia and South Korea, The Paper reported citing local statistics. Eastern Jiangsu was the second province to exceed CNY10 billion in 2020, the newspaper said. China's total GDP last year was CNY101 trillion, an increase of 2.3% over 2019 in comparable prices, the newspaper reported.