MNI China Daily Summary: Thursday, Dec 5
POLICY: Activity in China’s construction industry declined slightly in November, a Shanghai Metals Market survey showed, with 35% of firms starting new projects, down 5 percentage points from October, and 65% continuing with existing projects and not receiving new ones.
LIQUIDITY: The People's Bank of China (PBOC) conducted CNY37.3 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY153 billion after offsetting the maturity of CNY190.3 billion today, according to Wind Information.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.7179% from 1.6096% on Wednesday, Wind Information showed. The overnight repo average increased to 1.4878% from the previous 1.3888%.
YUAN: The currency strengthened to 7.2610 against the dollar, from 7.2688 at Wednesday's close. The PBOC set the dollar-yuan central parity rate lower at 7.1879, compared with 7.1934 set on Wednesday. The fixing was estimated at 7.2657 by Bloomberg survey today.
BONDS: The yield on 10-year China Government Bonds was last at 1.8900%, down from Wednesday's close of 1.8925%, according to Wind Information.
STOCKS: The Shanghai Composite Index gained 0.13% to 3,368.86, while the CSI300 index edged down 0.23% to 3,921.59. The Hang Seng Index was down 0.92% to 19,560.44.
FROM THE PRESS: American financial firms can play a greater role in developing healthy Sino-U.S. relations, He Lifeng, vice premier of the People's Republic of China, told John Waldron, President and COO at Goldman Sachs Group, adding that China will deepen reforms and expand high-level opening to the outside world. Beijing welcomes more U.S. financial institutions and long-term capital to deepen cooperation with China, He added. (Source: Yicai)
The yuan’s recent sharp decline is unsustainable given improved Q4 growth, additional policies for boosting domestic demand and promoting price recovery and the property sector, Shanghai Securities News reported, citing Wang Qing, analyst at Golden Credit Rating. The 10-year treasury-bond yield fell below 2% this week, the lowest since 2002, further deepening the China-U.S. interest spread, while yuan depreciation pressure could increase should the yield continue downward, the newspaper said, citing Gao Ruidong, chief macroeconomist at Everbright Securities.
Policymakers may be forced to disregard economic logic and retaliate against high tariffs to appease public demand for a response, Caixin reported, citing Yi Gang, former governor of the People’s Bank of China. Economists and advisors should continue advocating the benefits of free trade which improves global growth and household welfare, Yi added.