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Free AccessMNI China Daily Summary: Thursday, December 14
TOP NEWS: The People's Bank of China raised the interest rates on its open
market operation instruments and its Medium-Term Lending Facility (MLF) loans by
five basis points each, one day after the U.S. Federal Reserve raised its main
interest rate by 25 basis points. The PBOC raised the interest rate on its
seven-day reverse repos to 2.50% from 2.45%, the rate on its 28-day reverse
repos to 2.80% from 2.75%, and the rate on its one-year MLF loans to 3.25% from
3.20%, the central bank announced on its website. This was the first PBOC rate
hike since March 16, when the PBOC raise its open market operation and MLF loan
rates by 10 basis points each.
TOP NEWS: China's November economic data was in line with expectations.
China's industrial output rose 6.1% year-on-year in November, lower than the
6.2% year-on-year increase in October. The November result matched the MNI
survey median forecast for a 6.1% rise. Retail sales rose 10.2% year-on-year in
November, lower than the MNI survey median forecast for a 10.3% gain but
stronger than the 10.0% growth rate in October. Fixed-asset investment rose 7.2%
year-over-year in the first 11 months of 2017, slower than the 7.3% gain posted
in the January-to-October period. The January-to-November figure matched the MNI
survey median forecast for a 7.2% increase.
TOP NEWS: The rate hikes Thursday by the People's Bank of China should have
occurred sooner and been larger to address the imbalances in the current market
interest rate structure, former PBOC chief economist Ma Jun said. The PBOC move
signals that China intends to defend the yuan exchange rate against short
sellers and stabilize the interest rate gap with the U.S., Ma wrote in a
statement emailed to MNI. Ma, now director of the Center for Financial and
Development Studies at Tsinghua University, said rates should be raised further,
if conditions allow, to balance the interest rates between the PBOC's open
market instruments and the actual costs of borrowing in China's domestic
markets.
RATES: Money market rates were lower. The seven-day repo average was last
at 2.8983%, compared with Wednesday's average of 2.9457%. The overnight repo
average was at 2.8115%, compared with Wednesday's 2.8143%.
LIQUIDITY: The PBOC injected a net CNY50 billion in its open market
operation and CNY288 billion via its one-year Medium-term Lending Facility (MLF)
loans to hedge the impact of December tax payments and MLFs that mature Saturday
as well as to satisfy financial institutions' seasonal liquidity needs in order
to maintain stable overall liquidity conditions in the banking system, the PBOC
said in its announcement. The OMO and MLF operations resulted in a net injection
of CNY148 billion into the banking system today, as a total of CNY190 billion in
reverse repos mature Thursday. Taking account the CNY187 billion in MLF loans
that mature Saturday, the operations drained a net CNY39 billion.
YUAN: The yuan was stronger against the U.S. dollar after the People's Bank
of China set the fixing rate much stronger for the day. The yuan was last at
6.6108 against the U.S. unit, compared with the official closing price of 6.6203
on Wednesday. The PBOC set the yuan central parity rate at 6.6033, 218 bps
stronger than Wednesday's 6.6251.
BONDS: The yield on benchmark 10-year China government bonds was last at
3.9100%, down from a previous close of 3.9250%.
STOCKS: Stocks were down, led lower by financial sector. The benchmark
Shanghai Composite Index closed down 0.32% at 3,292.44. Hong Kong's Hang Seng
Index was 0.23% lower at 29,155.38.
FROM THE PRESS: The reform movement to push mixed public-private ownership
and restructuring of state-owned enterprises will accelerate in 2018, the
Economic Information Daily reported Thursday. Regulators will enhance controls
on SOE funding, particularly for companies run by the central government. The
new round of mixed-ownership reform will focus on monopoly sectors including
oil, gas and railways, the report said, adding that sectors suffering excess
capacity, such as steel, coal and electricity generation, are also main targets.
In the next three years, deleveraging of SOEs finances will be stressed, which
will impact the overall level of fixed-asset investment, the report noted.
(Economic Information Daily)
The momentum to tighten regulation of the asset management sector will not
change and regulators will remove asset management risks in an orderly and
steady manner, the Financial News, a journal run by the People's Bank of China
said in a commentary Thursday. Vested interest groups are trying to obstruct the
launch of the new regulations with the excuse that the new rules would cause
systemic risks, the commentary warned. Financial institutions will suffer some
short-term pain under the new regulations, and even see their asset management
businesses shrink, but regulators will not change course considering the
excessive financial market volatility that was triggered by the messy asset
management sector in recent years, the commentary stressed. (Financial News)
China cannot simply follow the U.S government tax cut with one of its own,
as the country needs strong fiscal support and should maintain operating
efficiency improvement of state-owned enterprises as the top priority, the
Securities Times reported Thursday. China needs to increase its productivity and
maintain low aggregate costs to compete with the U.S, the report said. The U.S
can issue government bonds to supplement fiscal shortages and transfer crises,
but China can not. Chinese companies need to improve their core competitiveness
and should not rely on a tax cut, the report noted. In practice, China has
reduced its taxes by replacing the business tax with a value-added tax (VAT) and
removing many administrative fees, the report argued. (Securities Times)
--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com
--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com
[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]
To read the full story
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.