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Free AccessMNI China Daily Summary: Monday, November 1
DATA: Caixin China's manufacturing PMI for October rebounded 0.6 points on month to 50.6, bouncing back to the expansionary zone above the breakeven 50, the financial publisher Caixin said on Monday. The manufacturing industry in October saw strong demand but weak supply, with the production sub-index falling further from September and remaining in the contraction zone for three consecutive months. Surveyed manufacturers said power and raw material shortages, and rising costs constrained output.
DATA: The China Purchasing Managers' Index (PMI) slid to 49.2 in October from September's 49.6, further falling into contraction for the second month and was the weakest since February 2020, as an electricity crunch and high commodity prices took their toll, data from the National Bureau of Statistics on Sunday showed.
LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rates unchanged at 2.2%. The operation led to a net drain of CNY190 billion after offsetting the maturity of CNY200 billion reverse 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) fell to 2.1146% from 2.3400% on Friday, Wind Information showed. The overnight repo average decreased to 2.0331% from the previous 2.1220%.
YUAN: The currency weakened to 6.4032. against the dollar from 6.4009 on Friday. The PBOC set the dollar-yuan central parity rate higher at 6.4192, compared with the 6.3907 set on Friday.
BONDS: The yield on 10-year China Government Bond was last at 2.9700%, down from Friday's close of 2.9950%, according to Wind Information.
STOCKS: The Shanghai Composite Index edged down 0.08% to 3,544.48 while the CSI300 index lost 0.37% to 4,890.69. Hang Seng Index fell 0.88% to 25,154.32.
FROM THE PRESS: The Chinese yuan may still be under depreciation pressure given the U.S. dollar is likely to strengthen as the Federal Reserve starts to reduce debt purchases, said the Financial News, a newspaper of the People's Bank of China, citing an unidentified expert. The dollar is due for a technical rebound, as it has fallen a lot after the U.S. Q3 GDP data was announced last week, the newspaper said.
Offshore yuan deposits are expected to further increase due to the recent appreciation of the yuan and the wide interest spread as China is unlikely to cut interest rates in the short term, the 21st Century Business Herald reported citing Lin Junhong, a research head at the Shanghai Commercial Bank. In September, yuan deposits in Hong Kong increased by 1.6% m/m to CNY855.9 billion, a record high in nearly six years. The further deepening of cross-border linkages such as those for stocks and bonds also drove demand for offshore yuan, though it is only the first stage of yuan internationalization as funds are still under closed-loop management, the newspaper said citing Ba Shusong, the chief China economist of the Hong Kong Stock Exchange. Ba suggested the authority should consider cross-border transactions in yuan or keeping the funds after assets sold in Hong Kong in the future, according to the newspaper.
Promoting more infrastructure investment will be significant for China countering the economic slowdown and improve economic efficiency, the official newspaper Economic Daily said in an editorial. As more projects get approved, infrastructure spending is expected to provide more significant boost to the economy in the fourth quarter, the newspaper said. Authorities should properly use local government special bonds, REITs and other policy tools to create more funding for infrastructure, said the newspaper. Separately, the newspaper said China has accelerated the issuances of local government bonds, with Q3 local debt amounting to CNY1.4 trillion, providing funding for "strategic projects" such as transportation and social programs, and many local governments have begun to plan applications for special-purpose bonds next year.
China should expand the issuance of yuan-denominated treasury bonds as "safe-haven assets" for foreign investors to raise the country's status in the global financial system, China Daily reported citing Zhang Ping, the deputy director of the National Institution for Finance and Development. To promote yuan usage, China should allow more foreign investors to hold yuan assets, either under the capital account or through the opened yuan-denominated financial product trading, the newspaper said citing Zhou Chengjun, director of the PBOC's Financial Research Institute. China's internationalization of the RMB is not to challenge the U.S. dollar but to reduce yuan volatility, the newspaper cited Zhou as saying.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.