MNI China Daily Summary: Monday, November 21

LPR: China's reference lending rate remained unchanged on Monday, which was in line with market expectations as the central bank kept a key policy rate steady last Tuesday. The Loan Prime Rate, based on the rate of People's Bank of China (PBOC)'s Medium-term Lending Facility and quotes submitted by 18 banks, remains at 3.65% for the one-year maturity and 4.3% for over-five-years, according to a statement on the PBOC's website.

EXCLUSIVE: China has been left more reliant on large global businesses for direct foreign investment as strict Covid rules have alienated small and medium-sized firms, with prospective investors keen for Beijing to provide greater access and policy clarity, British Chamber of Commerce China managing director Steven Lynch told MNI.

POLICY: China’s monetary policy has provided strong support for the economy and the People's Bank of China's balance sheet has remained relatively stable in recent years as support has increased, said PBOC Governor Yi Gang at the Financial Street Forum 2022. Yi said the intensity of policy is appropriate, which not only supports the stability of the economy but also maintains stable prices in the context of global high inflation.

POLICY: China’s top securities regulator said it will focus on serving the real economy and monitor the difficult challenges facing the real estate industry, according to Yi Huiman, chairman of the China Securities Regulatory Commission speaking at the Financial Street Forum 2022. The CSRC will support both the implementation of plans to improve the balance sheets of high-quality real estate developers and reasonable bond financing needs.

LIQUIDITY: The PBOC injected CNY3 billion via 7-day reverse repos with the rates unchanged at 2.00%. The operation led to a net drain of CNY2 billion after offsetting the maturity of CNY5 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 1.6416% from 1.7213% on Friday, Wind Information showed. The overnight repo average decreased to 1.0776% from the previous 1.3195%.

YUAN: The currency weakened to 7.1630 against the dollar from 7.1275 on Friday. The PBOC set the dollar-yuan central parity rate higher at 7.1256, compared with 7.1091 set on Friday.

BONDS: The yield on 10-year China Government Bond was last at 2.8200%, down from Friday's close of 2.8300%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.39% to 3,085.04, while the CSI300 index fell 0.85% to 3,769.13. The Hang Seng Index lost 1.87% to 17,655.91.

FROM THE PRESS: The PBOC is expected to further promote credit expansion with structural tools and increase the quota of policy bank-backed financial instruments to boost investment, China Securities Journal reported citing analysts. The PBOC may launch re-lending program to support the consumption of new energy vehicles, or provide discounts on the interest rate of re-lending program for technological innovation, the newspaper said citing Zhong Zhengsheng, chief economist of Ping An Securities. Another key focus of monetary policy is to help accelerate investment with supporting finance. As of October, a total CNY740 billion of policy bank-backed financial instruments were issued and there could be additional quotas announced, the newspaper said citing Ming Ming, chief economist at CITIC Securities.

More tier-two cities are likely to relax restrictions for home purchases and loans following Xi’an efforts to boost demand for second-hand housing, according to the China Business Journal. Xi'an, which has seen transactions fall 28% this year, will allow people working in the city without formal localised status, known as "non-Hukou residents", to pay six months of income tax - rather than two years currently - before being allowed to purchase a second-hand property. Those deemed "required talents" will not need to pay any income tax before buying. This move follows the 16 point support package announced last week by the central authorities designed to increase liquidity in the stressed property sector, with many analysts saying reviving buy-side demand was key to a recovery.

China should rectify excessive Covid controls, while avoiding the relaxation of Covid prevention in the name of refining control measures, said Xinhua News Agency in a commentary. It is necessary to correct simple practices such as expanding the scope of control areas and people under observation, and prevent unscientific practices like testing two or three times a day, Xinhua said. Local governments should focus on fighting the epidemic in key areas, take more resolute and decisive measures to curb the spread of the epidemic as soon as possible, instead of taking a wait-and-see attitude, Xinhua said. The epidemic has not gone away, and prevention cannot be relaxed, Xinhua added.