MNI China Daily Summary: Thursday, February 1

EXCLUSIVE: China’s headline inflation rate will remain weak this year as consumption and the property sector improve moderately, while manufacturing oversupply will likely weigh on future prices over the long term, policy advisors and economists told MNI.

DATA: China's Caixin manufacturing PMI registered 50.8 in January, flat from December, staying in the expansionary zone above the breakeven 50 mark for the third month, with pro-growth policies taking effect, the financial publisher said.

POLICY: China will strengthen fiscal efforts to boost investment and consumption to support economic recovery, officials of Ministry of Finance told reporters in a briefing. The authorities will maintain an appropriate fiscal expenditure and allocate effectively funds raised by government bonds to bolster investment.

POLICY: U.S. firms in China have increased profit expectations and lowered risk assessment for U.S.-China relations for 2024, according to a report by the American Chamber of Commerce. Firms with an optimistic or slightly optimistic outlook on the economy increased to 38% from 32% last year.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY43 billion via 7-day reverse repo, with the rates unchanged at 1.80%. The reverse repo operation has led to a net drain of CNY423 billion reverse repos after offsetting CNY466 billion maturity today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.8354% from 1.8706% on Wednesday, Wind Information showed. The overnight repo average decreased to 1.6822% from the previous 1.7049%.

YUAN: The currency weakened to 7.1832 against the dollar from 7.1795 on Wednesday. The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 7.1049, compared with 7.1039 set on Wednesday. The fixing was estimated at 7.1787 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.4320%, down from Wednesday's close of 2.4330%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.64% to 2,770.74, while the CSI300 index was up 0.07% to 3,217.71. The Hang Seng Index was up 0.52% to 15,566.21.

FROM THE PRESS: The government should use investment to boost the economy after January’s PMI reading of 49.2 showed domestic demand remained insufficient, according to Zhang Liqun, a special analyst at the China Federation of Logistics and Purchasing. Going forwards, the PMI will remain moderate as domestic demand recovers, but the Spring Festival and uneven trade patterns will cause fluctuations, according to Zhou Maohua, macro researcher at China Everbright Bank. Manufacturers will see energy and industrial raw material supply chains impacted by geographical conflicts, causing uncertainty, Zhou added. (Source: 21st Century Herald)

Authorities are carefully monitoring price fluctuations during the Spring Festival season and taking action to avoid risks that may affect the market order, according to Pu Chun, deputy director of the State Administration for Market Regulation. Pu, speaking at a press conference, said authorities were watching prices of hotel and restaurants, transportation and logistics, and food. The administration was taking action to stabilize prices, Pu added. (Source: 21st Century Herald)

Local governments including Chongqing and Nanchang city are providing local banks with a “whitelist” of property projects capable of receiving financing support. Chongqing has sorted out the first batch of 314 real estate projects with financing needs of about CNY83 billion and recommended them to 28 major banks in the city. Banks will shorten the credit approval time for projects with guaranteed repayment sources, and flexibly offer new loans to projects that have temporary financial difficulties but can maintain a balance of funds, said Liu Shui, research head of China Index Academy. More cities are expected to follow suit to ease the tightening of property loans and expand real-estate investment. (Source: Shanghai Securities News)