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Free AccessMNI China Daily Summary: Thursday, December 16
POLICY: China has front-loaded CNY1.46 trillion of 2022 local government issuance as a special bond quota to be allocated in December, requiring local authorities to use the funds to kick-start feasible infrastructure projects in Q1 2022 and help prevent an economic slowdown, Xu Hongcai, assistant to the minister of finance, said at a briefing Thursday.
LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.2%. This keeps the liquidity unchanged after offsetting the maturity of CNY10 billion repos 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) decreased to 2.1884% from 2.1904% on Wednesday, Wind Information showed. The overnight repo average fell to 2.0903% from the previous 2.1242%.
YUAN: The currency weakened to 6.3679 against the dollar from 6.3652 on Wednesday. The PBOC set the dollar-yuan central parity rate lower at 6.3637, compared with 6.3716 set on Wednesday.
BONDS: The yield on 10-year China Government Bond was last at 2.8925%, up from Wednesday's close of 2.8800%, according to Wind Information.
STOCKS: The Shanghai Composite Index edged up 0.75% to 3,675.02, while the CSI300 index increased 0.58% to 5,034.73. Hang Seng Index gained 0.23% to 23,475.50.
FROM THE PRESS: China’s Loan Prime Rates, the benchmark lending rates, are likely to be lowered by 5 basis points next Monday, given that banks’ borrowing costs have dropped significantly after two RRR cuts and partial refinancing interest rate cuts, the China Securities Journal reported citing Zhang Jiqiang, chief fixed income analyst at Huatai Securities. The central bank kept the rate of medium-term lending facility, the anchor of LPR, unchanged on Wednesday as it intends to signal prudent monetary policy stance has not changed. PBOC is still likely to cut MLF rate in the first half of next year to revive growth, the newspaper said citing Wang Qing, chief macro analyst with Golden Credit Rating.
China is expected to see greater and concerted efforts in the first quarter to boost growth and implement its goal of stability, after November indicators showed slowing demand and output, Yicai.com reported. The annual local government special bonds are expected to be kept above CNY3 trillion, and several provinces have received quotas early, which will facilitate early issuances next year to be used to boost investment and consumption, Yicai said. Several ministries are also taking measures to address weakening demand and some industrial output, reflected in slowing Nov retail sales and auto production. China is actively pushing for building large-scale solar and wind electricity bases, investing in transportation and upgrading manufacturing, logistics and digital communication, it said.
China announced new measures to boost support for small businesses, with the central bank guaranteeing more loans and discounted credits. The PBOC will inject more funding to local lenders, amounting to 1% of the outstanding loans they hold, the State Council said following a meeting on Wednesday. China will turn a CNY400 billion SME refinancing program onto a rolling basis and will increase the amount if necessary, the government said. China will also increase support for manufacturing through further cutting taxes and fees, including bigger research cost deductions and mroe VAT rebates, it said. China will also increase support for foreign firms setting up high-end production and research centres, it said.
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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.