MNI China Daily Summary: Monday, January 24

LIQUIDITY: The People's Bank of China (PBOC) pumped in CNY150 billion via 14-day reverse repos Monday, with the rate dipping to 2.25% from the previous 2.35%. The operation led to a net injection of CNY50 billion after offsetting CNY100 billion maturing reverse repos, according to Wind Information. The 14-day rate cut followed a 10-bp cut to the rate of 7-day reverse repos last Monday, as well as that of 1-year MLF. The operation aims to keep liquidity stable before the Spring Festival holiday, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 2.0499% from 2.1057% on Friday, Wind Information showed. The overnight repo average fell to 1.9286% from the previous 2.0489%.

YUAN: The currency strengthened to 6.3320 against the dollar from 6.3397 on Friday. The PBOC set the dollar-yuan central parity rate lower at 6.3411, compared with 6.3492 set on Friday.

BONDS: The yield on 10-year China Government Bond was last at 2.6725%, down from Friday's close of 2.7025%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.04% to 3,524.11 while the CSI300 index gained 0.16% to 4,786.74. Hang Seng Index lost 1.24% to 24,656.46.

FROM THE PRESS: China may lower its budget deficit-to-GDP ratio to about 2.8-3% in 2022 from the “about 3.2%” set last year, retreating to the 3% red line as the economy gradually normalizes, the Securities Times reported citing Wu Chaoming, the chief economist at Chasing Securities. The high government deposits, due to higher surplus funds carried over from the previous two years, will be a strong support to expand fiscal spending, the newspaper cited Wu as saying. Some analysts expect another issuance of special China treasury bonds this year as a follow-up to CNY1 trillion issued in 2020 immediately following the Covid-19 outbreak, which is not included in the fiscal deficit. About CNY950 billion special treasury bonds are maturing this year, the newspaper said.

Local governments in China will be more flexible in relaxing housing regulations this year as they prioritize development and meet the reasonable needs of homebuyers, the China Securities Journal reported. Banks will quicken mortgage approvals to boost transactions and stabilize overall prices, the newspaper said citing Xu Xiaole, chief analyst with Beike Research Institute. Authorities will also promote large-scale construction of affordable housing this year to help stabilize real estate investment, the newspaper said citing analysts.

China won’t bow to the IMF’s opposition to its zero-COVID policy as it sees the strict measures guarantee the smooth operation of the economy, Lu Xiang, a researcher at the Chinese Academy of Social Sciences, wrote in a commentary for the government-run Global Times. The IMF Managing Director Kristalina Georgieva said on Friday that China's policy is putting more at risk as a supply source for the rest of the world, Lu wrote. China has joint prevention and control mechanism and will never give it up, while Western countries lack the ability, Lu wrote.