MNI China Daily Summary: Monday, January 13
MNI (BEIJING) - POLICY: The People’s Bank of China (PBOC) raised a key parameter to unlock more foreign debt finance and encourage capital inflow to shore up the yuan. According to the PBOC’s website, the Bank will work with the State Administration of Foreign Exchange, to raise the macro-prudential adjustment parameter for cross-border financing by enterprises and financial institutions from 1.5 to 1.75, effective Jan 13.
POLICY: The PBOC will prevent any risk of the yuan exchange rate overshooting and enhance Hong Kong’s role as an offshore hub, said Governor Pan Gongsheng.
POLICY: The PBOC will increase the allocation of its foreign exchange reserves in assets in Hong Kong and expand the HK-Mainland Connect schemes to support growth of financial markets, said Governor Pan.
POLICY: The PBOC will reduce interest rates and the reserve requirement ratio to maintain ample liquidity and support financing of the economy, said Governor Pan in Hong Kong.
DATA: China's exports grew 10.7% y/y to USD335.6 billion in December, exceeding the 7.4% y/y consensus and November's 6.7% y/y increase, according to data released by China Customs. Imports, which amounted to USD230.8 billion, registered a 1.0% y/y growth, up from the consensus of a 1.4% y/y decrease and last month's 3.9% y/y drop.
DATA: China imported 47.8 million metric tonnes of crude oil in December, down from 48.5 mmt in November, as total inbound shipments finished the year declining 1.9% y/y, data from China Customs showed.
LIQUIDITY: The PBOC conducted CNY24.8 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net injection of CNY10.7 billion after offsetting the maturity of CNY14.1 billion today, according to Wind Information.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 2.0223% from 1.7472%, Wind Information showed. The overnight repo average increased to 1.8675% from 1.6747%.
YUAN: The currency strengthened to 7.3314 against the dollar from 7.3326 on Friday. The PBOC set the dollar-yuan central parity rate lower at 7.1885 on Monday, compared with 7.1891 set on Friday. The fixing was estimated at 7.3450 by Bloomberg survey today.
BONDS: The yield on 10-year China Government Bonds was last at 1.6525%, up from the previous close of 1.6475%, according to chinamoney.com.cn.
STOCKS: The Shanghai Composite Index edged down 0.24% to 3,160.76 while the CSI300 index decreased 0.27% to 3,722.51. The Hang Seng Index fell 1.00% to 18,874.14.
FROM THE PRESS: The Chinese economy is expected to grow by 4.8-5.2% y/y in Q4, rising from Q3’s 4.6% and achieving the annual growth target of around 5%, Yicai.com reported, citing analysts. Despite a higher comparison base, additional policies launched since September have driven a recovery in consumption, real estate and industrial production, while exporters rushed shipments ahead of anticipated new tariffs also supported growth, the newspaper said. Retail sales are likely to rise by 0.5 percentage points to 3.54%, while industrial output may decelerate slightly from the previous 5.4% to 5.35%, the newspaper noted, citing the median of economists surveyed.
China’s SME Development Index reached 89.0 in Q4 2024, up 0.1 points from Q3, with the macroeconomic perception sub-index turning from decline to flat, the China Association of Small and Medium Enterprises said. Ma Bin, executive vice president at the Association, noted SME confidence has gradually improved as the government released stock policies, but domestic demand remained insufficient. In the final quarter, construction, transportation, wholesale and retail industries turned from decline to flat versus Q3, with real estate, information and software, and accommodation and catering industry indexes continuing to decline, down 0.1, 0.1, and 0.2 points from the previous quarter.
Chinese provincial and city governments on Monday will issue local government bonds for the first time this year, Securities Daily reports. Local governments will sell more than CNY720 billion of special bonds during Q1, of which new special bonds exceeds CNY300 billion and refinancing special bonds of more than CNY410 billion. Authorities have begun debt issuance early this year given plans for a more proactive fiscal policy, said Bai Yanfeng, professor at the School of Finance and Taxation at the Central University of Finance and Economics. Wen Bin, chief economist at Minsheng Bank expects the limit of special bonds in 2025 to reach CNY4.5 trillion.