MNI China Daily Summary: Monday, October 28
EXCLUSIVE: China is likely to deploy over CNY10 trillion in fiscal stimulus over the next few years to ensure the economy grows by its target of around 5%, a prominent policy advisor told MNI, adding that CNY1 trillion of special treasuries could be issued later this year and calling for a CNY2 trillion fund to stabilise the stock market.
EXCLUSIVE: The People’s Bank of China (PBOC) will likely guide down the reference lending rate by another 50-100 basis points in 2025 alongside significant fiscal expansion to lift inflation above 2%, a prominent policy advisor told MNI in an interview, noting potential U.S. policy next year to curtail China’s exports could inadvertently lead to further measures that boost domestic demand.
EXCLUSIVE:Policy support aimed at China’s property sector will stimulate trillions of yuan in new purchases and help stabilise the market within a year, advisors and analysts told MNI, pointing to recent growth in home sales and land prices.
POLICY: The PBOC revealed Monday it would add outright reverse repo to its monetary policy toolkit to help maintain adequate liquidity in the banking system, targeting trades with primary dealers in its open market operations.
LIQUIDITY: The PBOC conducted CNY241.6 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net injection of CNY32.7 billion after offsetting the maturity of CNY208.9 billion today, according to Wind Information.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.7216% from 1.7353%, Wind Information showed. The overnight repo average decreased to 1.4971% from 1.5126%.
YUAN: The currency weakened to 7.1273 against the dollar from 7.1219 on Friday. The PBOC set the dollar-yuan central parity rate higher at 7.1307, compared with 7.1090 set on Friday. The fixing was estimated at 7.1309 by Bloomberg survey today.
BONDS: The yield on 10-year China Government Bonds was last at 2.1425%, down from the previous close of 2.1470%, according to chinamoney.com.cn.
STOCKS: The Shanghai Composite Index gained 0.68% to 3,322.20 while the CSI300 index increased 0.20% to 3,964.16. The Hang Seng Index edged up 0.04% to 20,599.36.
FROM THE PRESS: Profits of industrial enterprises above a designated size declined by 27.1% y/y in September, due to high-base effects and following August's 17.8% drop, Yicai.com reported, citing National Bureau of Statistics data. High-base levels and a limited rebound of industrial goods prices will impact profit recovery in Q4, said Wu Chaoming, vice president at the Chasing Institute. Recent policy support needs time to benefit profitability and companies’ willingness to add leverage remains weak, said Wu, noting private firms’ asset and liability growth rates have hit historical lows.
Foreign capital remains an important builder for China’s financial market, according to Lou Jiwei, former Minister of Finance. Speaking at the Global Wealth Management Forum in Shanghai, Lou was confident China can attract foreign financial institutions, with the Shanghai International Financial Centre able to optimise the global financial landscape. An open and high level financial system was an important part of Chinese modernisation, Lou continued, adding that major economies’ monetary-policy adjustments had increased the risk of disorderly international capital flows.
Beijing and Brussels agreed to continue negotiating on EV anti-subsidy measures during a recent leadership call, 21st Century Business Herald reported. Industry experts said the EU showed positive sentiment by initiating the call, which also increased chances the European team will travel to China for the next round of talks. Discussions can continue after Brussels imposes the final ruling on Oct 30 even if the two sides do not find a consensus before, experts added.