MNI China Daily Summary: Monday, January 6
EXCLUSIVE: China should offer to collaborate in boosting American industry as it seeks to stave off U.S. President-elect Donald Trump’s threats of 60% tariffs, but Beijing also needs to prepare for a worst-case scenario of a significant further deterioration in bilateral relations, a prominent economist told MNI in an interview.
EXCLUSIVE: China’s central government needs to issue debt to purchase unsold housing stock and to bail out local administrations as it prepares the economy for the impact of U.S. tariffs by boosting domestic demand, though there is a risk that policymakers will instead fall back on their traditional approach of relying on investment to drive growth, prominent economist Yao Yang told MNI.
LIQUIDITY: The People's Bank of China (PBOC) conducted CNY14.1 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY75.0 billion after offsetting the maturity of CNY89.1 billion today, according to Wind Information.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.6127% from 1.6815%, Wind Information showed. The overnight repo average decreased to 1.4479% from 1.6181%.
YUAN: The currency weakened to 7.3296 against the dollar from 7.3093 on Friday. The PBOC set the dollar-yuan central parity rate lower at 7.1876, compared with 7.1878 set on Friday. The fixing was estimated at 7.3057 by Bloomberg survey today.
BONDS: The yield on 10-year China Government Bonds was last at 1.5927%, down from the previous close of 1.6076%, according to chinamoney.com.cn.
STOCKS: The Shanghai Composite Index edged down 0.14% to 3,206.92 while the CSI300 index decreased 0.16% to 3,768.97. The Hang Seng Index fell 0.36% to 19,688.29.
FROM THE PRESS: The PBOC plans to issue additional offshore central bank bills in Hong Kong in January, so to increase the supply and meet the strong demand for high-grade yuan bonds from overseas investors, Yicai.com reported citing sources close to the PBOC. The scale is expected to far exceed the largest single issuance in the past, and the timing also shows the PBOC’s determination to maintain a stable exchange rate, the newspaper said.
The PBOC has sent a clearer and stronger signal on stabilising the yuan in its Q4 monetary policy meeting, emphasising “strengthening market management” whilst deleting “enhancing exchange rate flexibility” which appeared in its Q3 meeting, PBOC-run newspaper Financial News reported. The PBOC showed determination to maintain yuan stability by restoring its previous “three resolutes” statement, meaning to resolutely deal with market order-disrupting behaviors, prevent the formation of unilateral expectations and their self-realisation, as well as guard against the risk of exchange rate overshooting, the newspaper said.
The Shenzhen Stock Exchange said it will further deepen capital market reform and improve the quality of listed companies, hoping foreign investors will strengthen confidence and adhere to long-termism, Economic Information Daily reported. The Shanghai Stock Exchange said China’s economic fundamentals have shown strong resilience in a complex international environment with a package of additional policies strengthening the upward trend, which provides favorable conditions for deepening market reform, the paper said.