MNI China Daily Summary: Thursday, February 08

EXCLUSIVE: Chinese local governments have set lofty GDP targets they aim to meet with increased investment and consumption, but tighter scrutiny over debt raising and falling fiscal revenue will restrain their capacity and could lead the central government to issue more bonds, policy advisors told MNI.

EXCLUSIVE: First-tier cities in China will likely ease homebuying restrictions progressively to stimulate demand without stirring up house prices, however, limited policy intensity and low consumer confidence could still stunt any durable sales rebound, advisors and analysts told MNI.

POLICY: China's Consumer Price Index fell more than expected by 0.8% y/y in January, falling further from December's 0.3% decline to hit the lowest level since September 2009, sending a deflationary signal amid softened demand, data from the National Bureau of Statistics showed.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY90 billion via 7-day reverse repo and CNY255 billion via 14-day reverse repo with the rates unchanged at 1.80% and 1.95%, respectively. The reverse repo operation has led to a net injection of CNY302 billion reverse repos after offsetting CNY43 billion maturity today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.7829% from 1.9538%, Wind Information showed. The overnight repo average decreased to 1.6174% from 1.7065%.

YUAN: The currency weakened to 7.1961 against the dollar from 7.1931 on Wednesday. The PBOC set the dollar-yuan central parity rate higher at 7.1063, compared with 7.1049 set on Wednesday.

BONDS: The yield on 10-year China Government Bonds was last at 2.4399%, up from Wednesday's close of 2.4175, according to Wind Information.

STOCKS: The Shanghai Composite Index rose 1.28% to 2,865.90 while the CSI300 index increased 0.64% to 3,364.93. The Hang Seng Index was down 1.27% to 15,878.07.

FROM THE PRESS: China has removed Yi Huiman as the chairman of the China Securities Regulatory Commission (CSRC) and appointed Wu Qing to the position. According to Shanghai Securities News, Wu obtained rich experience previously as the chairman of the Shanghai Stock Exchange where he called for strong action against market violations and pursuing accountability. Wu also worked as the director of risk management at the CSRC.

Local governments have accelerated the launch of major projects, with more infrastructures focusing on improving people’s livelihood, digitalisation and the green transition, Securities Daily reported citing analysts. According to incomplete statistics from Mysteel, a total of 7,970 projects were started across the country in January, an increase of 187.21% m/m, with total investment rising 202.46% m/m to CNY5.4 trillion. The proportion of private investment among newly started projects rose last month, and authorities should lower the threshold for social capital in some tech-based infrastructure and road transportation projects, said Wang Qing, chief macro analyst with Golden Credit Rating.

Shenzhen, one of the first-tier cities in China, lowered the threshold for non-local homebuyers by easing the requirement of tax and social insurance payments to three from five years on Wednesday to further stimulate demand as the market remains inactive to previous relaxations, 21st Century Business Herald reported. The authority also scrapped the tax and social insurance requirements for local residents but kept the purchase limit of two houses for families and one for singles. The policy intensity seems limited to attract more purchasing power, said an unnamed developer in the city. While some analysts think the effectiveness of the policy may appear after the New Year holiday when most citizens return from their home towns.