MNI China Daily Summary: Monday, September 23
POLICY: The People’s Bank of China eased the 14-day reverse repo rate by 10bps to 1.85% on Monday, the first reduction since January 2023, following the 7-day reverse repo rate cut in July, according to a statement on the PBOC’s website.
POLICY: China's rising debt-to-GDP ratio will not increase financial risks, as rising liabilities are accompanied by an increase in asset size, said Li Yang, chairman at the National Institution for Finance & Development, in Beijing on Saturday.
POLICY: China’s investment in the purchase of equipment and tools increased by 16.8% during the first eight months of the year, demonstrating the government’s success in supporting equipment upgrading and consumer goods trade-ins, Zhao Chenxin, deputy director at the National Development and Reform Commission, said at a press conference.
LIQUIDITY: The PBOC conducted CNY160.1 billion and CNY74.5 billion via 7-day and 14-day reverse repos, with the rate at 1.70% and 1.85%, respectively. The operation led to a net injection of CNY95.9 billion after offsetting CNY138.7 billion maturities, according to Wind Information.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.8850% from 1.9569% on Friday, Wind Information showed. The overnight repo average decreased to 1.9181% from 1.9328%.
YUAN: The currency weakened to 7.0587 against the dollar from 7.0552 on Friday. The PBOC set the dollar-yuan central parity rate lower at 7.0531, compared with 7.0644 set on Friday.
BONDS: The yield on 10-year China Government Bonds was last at 1.9850%, up from Friday's close of 1.9800%, according to chinamoney.com.cn.
STOCKS: The Shanghai Composite Index edged up 0.44% to 2,748.92, while the CSI300 index was up 0.37% to 3,212.76. The Hang Seng Index fell 0.06% at 18,247.11.
FROM THE PRESS: Authorities should implement at least CNY10 trillion of economic stimulus within one to two years by mainly issuing ultra-long-term special treasury bonds, said Liu Shijin, deputy director at the Economic Affairs Committee of the Chinese People's Political Consultative Conference. The stimulus should combine reforms to improve affordable housing, education, medical care, social security, elderly care for migrant workers, and accelerate the construction of smaller towns within the metropolitan area. The economic revitalisation plan should aim at doubling the country's middle-income group to 800-900 million people in about 10 years, as China has the potential to grow by 4-5% over the next five-10 years, said Liu. (Source: 21st Century Business Herald)
The government needs to boost consumer demand to ensure China’s economy meets its potential growth rate, said Cai Fang, chief expert at the National Think Tank of the Chinese Academy of Social Sciences, at a recent forum. Cai said geopolitics and anti-globalisation made external demand uncertain, and infrastructure and industrial investment was not large enough to be the main economic driver. Policy support to formalise the care economy would boost GDP given one-third of social services' labour time was unpaid and would increase employment opportunities for women, Cai noted.
Officials should eliminate banks’ concerns regarding whitelisted housing project lending by relaxing due diligence, said Wang Yiming, vice chairman at the China Center for International Economic Exchanges. Banks' enthusiasm to issue loans will increase if project and developers’ risks are separated, said Wang. Promoting the central bank's re-lending tool to buy-up unsold housing and narrowing the gap between new and existing mortgage rates can stabilise the market, Wang added. (Source: Yicai.com)