MNI China Daily Summary: Thursday, December 29

LIQUIDITY: The People's Bank of China (PBOC) injected CNY205 billion via 7-day reverse repos with the rates unchanged at 2.00%. The operation led to a net injection of CNY201 billion after offsetting the maturity of CNY4 billion reverse repos, according to Wind Information. The operation aims to keep year-end liquidity stable, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 2.4230% from 2.1517% on Wednesday, Wind Information showed. The overnight repo average decreased to 0.4204% from the previous 0.4759%.

YUAN: The currency strengthened to 6.9709 against the dollar from 6.9725 on Wednesday. The PBOC set the dollar-yuan central parity rate higher at 6.9793, compared with 6.9681 set on Wednesday.

BONDS: The yield on 10-year China Government Bonds was last at 2.8650%, down from Wednesday's close of 2.8875%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.44% to 3,073.70, while the CSI300 index fell 0.38% to 3,856.70. The Hang Seng Index was down 0.79% to 19,741.14.

FROM THE PRESS: Experts are divided on the extent to which China’s household pandemic era savings can fuel a rebound in consumption in 2023, according to Yicai.com. A recent survey by the PBOC showed 61% of urban residents intend to "save more", up 3.7 percentage points over the previous quarter, with 22.8% intending to “consume more”. Some experts believe the large increase in household deposits during the pandemic will be able to support a consumption rebound in 2023, but others say a large part of the savings is ringfenced for future real estate purchases once confidence has returned to the property sector, or are the result of investors liquidating bond positions as yields have declined, according to Yicai.com.

The yuan is expected to rise by about 5% to reach about 6.6 against the U.S. dollar next year as the Federal Reserve may end its rate hikes around mid-2023 as U.S. inflation cools, and as China’s GDP rebounds on reopening, 21st Century Business Herald reported citing Wang Qing, chief analyst at Golden Credit Rating. It is possible the yuan may fluctuate around 7 in the first half of 2023 as U.S. interest rates may still rise and support the U.S. Dollar Index, the newspaper said citing Wu Zhaoyin, director of AVIC Trust. It is not recommended to bet on the one-way appreciation of yuan, as the currency may also be impacted by Sino-U.S. relations, the global geopolitical situation and domestic real estate market, the newspaper cited Wang as saying.

China’s National Development and Reform Commission (NDRC) will focus on strengthening food security, energy resources and important supply chains, according to the Xinhua News Agency. At a recent work conference meeting, the NDRC said it will better coordinate epidemic prevention measures, and focus on stable growth, employment and prices. The powerful central planning agency will work to expand domestic demand, boost consumption and facilitate key investments. The meeting was chaired by He Lifeng, member of the Political Bureau of the CPC.