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TOP NEWS: The People's Bank of China (PBOC) lowered the 1-year medium-term lending facility (MLF) rate to 2.85% from 2.95% on Monday, while injecting CNY700 billion via 1-year MLF, the latest move expected by the market and part of a widening campaign to resuscitate sputtering growth. The cut, announced on the central bank’s website, was the first made to the medium-term policy benchmark since a 20-bp reduction in April 2020, and followed a 5-bp cut to banks’ December lending reference rate, known as Loan Prime Rate (LPR).
EXCLUSIVE: China is set to launch further waves of monetary and fiscal easing, including possible cuts of over CNY1 trillion in taxes and fees, as it de-emphasises a campaign to lower leverage in order to support companies facing continuing pandemic headwinds, weak consumption and imported inflation, former National Development and Reform Commission Secretary General Han Yongwen told MNI in an interview.
EXCLUSIVE: The world’s largest trade pact among 15 Asia-Pacific nations will boost China’s access to high-tech products at a time strained global supply chains lead to calls for more support measures to develop the country’s own high-tech capacity, policy advisors told MNI.
POLICY: China still has potential to expand effective investment to boost economic growth given its development stage, and the investment outlook is optimistic, said Ning Jizhe, director of the National Bureau of Statistics at a briefing on Monday. Investment had dragged down overall economic growth by 0.5% in Q4, bringing the Q4 GDP to a one-and-a-half-year low of 4.0%.
DATA: China's GDP further eased to 4.0% in Q4 2021, hitting the lowest level since Q2 2020 though outperforming the median forecast of 3.6%, and bringing the annual growth to 8.1%, also outshining an 8.0% forecast, according to data by the National Bureau of Statistics on Monday. Industrial production rebounded for the third month to 4.3% y/y in December, higher than the prediction of 3.7%, bringing the annual gain to 9.6%. Retail sales slowed to 1.7% y/y, underperforming the 3.8% forecast, with the annual figure reaching 12.5%. Fixed-asset investment rose 4.9% y/y in 2021 to the lowest point within this year.
LIQUIDITY: The PBOC injected CNY700 billion via a 1-year medium-term lending facility and CNY100 billion via 7-day reverse repos with the rate lowering to 2.85% and 2.10%, respectively, on Monday. The operation has led to a net injected of CNY290 billion after offsetting the maturity of CNY500 billion MLF and CNY10 billion repos today, according to Wind Information. The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 2.1660% from 2.2068% on Friday, Wind Information showed. The overnight repo average decreased to 2.0863% from the previous 2.2013%.
YUAN: The currency weakened to 6.3466 against the dollar from 6.3435 on Friday. The PBOC set the dollar-yuan central parity rate lower at 6.3599, compared with 6.3677 set on Friday.
BONDS: The yield on 10-year China Government Bond was last at 2.8325%, down from Friday's close of 2.8375%, according to Wind Information.
STOCKS: The Shanghai Composite Index edged up 0.58% to 3,541.67 while the CSI300 index gained 0.86% to 4,767.28. Hang Seng Index decreased 0.68% to 24,218.03.
FROM THE PRESS: The launch of a 25-year cooperation pact with Iran is a breakthrough in China advancing the internationalization of the yuan, the Global Times said in an editorial, after State Councillor Wang Yi met Iran’s FM Hossein Amir-Abdollahian in China’s Wuxi city last week. While the details of the agreement, spanning energy, infrastructure and technology, were not disclosed, the deal will benefit Iran’s much-needed economy under U.S. sanctions, the newspaper said. The yuan is an alternative to the U.S. dollar in trade settlement, listed by Iran’s central bank as a main forex currency, said the Times. As the U.S. debt and inflation woes led to diminished confidence in the dollar, the yuan’s status has risen in the global arena, it said.
China must seek breakthroughs in core technology and accelerate the building of new infrastructure as a part of its strategy to develop the digital economy, President Xi Jinping wrote in the official journal Qiushi, carried on the front pages of major state newspapers. There have been “unhealthy and disorderly signs and trends” in the digital economy’s development that threaten the nation’s economy and financial safety, which must be corrected and managed, Xi wrote. China should also actively participate in global cooperation to help strengthen its “national competitive advantage,”, as its digital economy lacks strength and excellence, said Xi.
Housing markets in China’s largest cities may rebound after Q1 as regulators ease restrictive policies and allow easier funding to the industry, the China Securities Journal said citing researchers including Li Yujia of Guangdong Housing Policy Research Center. Signs that the market has bottomed out include rising prices of pre-owned homes in December from November and that more cities reported gains in prices of new homes, the newspaper said. However, the housing market may remain sluggish unless the central bank further cuts lending costs, it said.
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