MNI China Daily Summary: Monday, Nov 2

EXCLUSIVE: China will need another five years of fiscal stimulus to overcome the hit from the Covid-19 pandemic to global trade, a high-ranking advisor to fiscal authorities told MNI in an interview in which he also said the government may consider new taxes on booming digital industries and should shoulder a greater share of the spending burden rather than relying on heavily-indebted local administrations. Local administrations are being called upon to repeat the stimulus they provided after the 2008 financial crisis, but lack the capacity, said LiuShangxi, head of the Chinese Academy of Fiscal Sciences under the Ministry of Finance, adding that the central government should instead provide more stimulus, particularly by encouraging state-owned companies to support infrastructure projects.

EXCLUSIVE: China still needs GDP growth of more than 5% a year from 2021 to 2025 to support employment and quality development, policy advisors in Beijing insist, despite the latest plenum of the Communist Party eschewing a specific growth rate for the next-five-year plan after the annual target was dropped this year amid Covid uncertainty. According to the communique released Thursday after the Fifth Plenary Session of the Communist Party, the country will focus on quality and efficiency rather than any explicit pace of growth, with China aiming to pull its per capita output levels up to that of moderately developed countries by 2035.

POLICY: China should use an expansion in domestic consumption to drive sustainable economic growth and help combat the rise of counter-globalization trends, according to Chinese President Xi Jinping. In an article published in the Communist Party magazine QiuShi on Nov. 1, which cited a speech given in April, Xi said that China should focus on innovation and improving the quality of its industrial chains to better integrate with global supply chains, and create a counterbalance to achieve self-circulation under extreme circumstances.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY50 billion via 7-day reverse repos with the rate unchanged on Monday. The PBOC leaves the liquidity unchanged since the same amount of reverse repos matured 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 2.4630% from Friday's close of 2.5889%, Wind Information showed. The overnight repo average declined to 2.2966% from the previous 2.3004%.

YUAN: The currency slightly strengthened to 6.7001 against the dollar from 6.7002 on Friday. The PBOC set the dollar-yuan central parity rate lower at 6.7050, compared with the 6.7232 set on Friday.

BONDS: The yield on 10-year China Government Bond was last at 3.1725%, down from the close of 3.1750%% on Friday, according to Wind Information.

STOCKS: The Shanghai Composite Index increased 0.02% to 3,225.12, while the CSI300 index increased 0.54% to 4,720.83. Hang Seng Index rose 1.46% to 24,460.01.

FROM THE PRESS: China should keep the current limit on the yuan's movement to 2% to avoid sending a misleading signal which might encourage speculation, wrote Sheng Songcheng, a former counsellor of the People's Bank of China, in an article published by the International Economic Review. China should beware of fast capital inflows and the quick appreciation of the yuan while relaxing restrictions to facilitate outbound investments, Sheng said.

China's 4,066 public companies reported CNY CNY1.27 trillion in combined profits from Q3 as of Nov. 1, up 18% y/y, and confirming the recovering macro indicators reported by the government, the Economic Information Daily reported on Monday citing data from Wind. Revenues from Q3 gained 6.9% from CNY13.47 trillion, according to the Daily. Around 37.6% of the companies reported a decline in net profits. Upstream businesses, including the resource sector, led the rebound from losses in the previous quarter, while airports and transportation also improved as the pandemic effects waned, according to the data.

China will simplify the initial public offering process for companies by introducing a registration-based screening mechanism that emphasizes companies' disclosures, with the changes extended to all boards, according to a statement by Vice Premier Liu He. China will also improve the market-based interest rate system so policy rates can be extended to all participating companies, according to Liu, who heads the Financial Stability and Development Committee of the State Council.