MNI China Daily Summary: Monday, January 8

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY50 billion via 7-day reverse repo, with the rates unchanged at 1.80%. The reverse repo operation has led to a net drain of CNY40 billion reverse repos after offsetting CNY90 billion maturity today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.7918% from the previous 1.7833%, Wind Information showed. The overnight repo average increased to 1.5877% from the previous 1.5810%.

YUAN: The currency weakened to 7.1599 against the dollar from 7.1566 on Friday. The PBOC set the dollar-yuan central parity rate lower at 7.1006, compared with 7.1029 set on Friday. The fixing was estimated at 7.1498 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bond was last at 2.5750%, up from the previous close of 2.5725%, according to Wind Information.

STOCKS: The Shanghai Composite Index fell 1.42% to 2,887.54 while the CSI300 index lost 1.29% to 3,286.06. The Hang Seng Index tumbled 1.88% to 16,224.45.

FROM THE PRESS: Local government financing vehicles' appetite for high-interest, short-term offshore debt issuance could attract the attention of regulatory authorities in future as the deals sidestep rules that aim to limit local debt and lower costs for local governments, Yicai.com reported citing Wang Lei, head of industrial and commercial enterprise rating at S&P Global Ratings. LGFVs are keen to issue foreign bonds maturing in 364 days to escape the regulatory scope, which only targets one-year foreign debt instruments. A total of 234 LGFV bonds were issued overseas throughout 2023, raising USD25.37 billion, of which more than two-thirds have maturities of less than one year. The average financing interest rate of these short-term bonds is 6.5%.

The PBOC said it will support commercial banks to issue rental housing development loans to real-estate companies, industrial parks, enterprises and institutions to build and renovate long-term rental housing, according to a statement on its website. It will also encourage banks to issue loans for group purchases of unused houses for long-term holdings and operations as affordable or rental housing. This latest guideline aims to solve the living problems of new citizens and young people mainly in big cities, and will take effect from Feb 5.

The State Council will improve the income handover mechanism of state-owned enterprises and expand the scope of income turned over, Yicai.com reported following the latest government guideline. Some SOEs were previously not included. In 2020, the central government required the proportion of SOE funds transferred to the public budget to increase to 30%, mainly to safeguard and improve people’s livelihood. The national state-owned capital operation budget revenue was about CNY568.9 billion in 2022, while the expected revenue in 2023 is about CNY535.8 billion.