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EXCLUSIVE: A possible memorandum of understanding(MOU) after this week's
China-U.S. trade talks will probably contain only vague wording about
stabilizing the yuan exchange rate, rather than specific pledges, policy
advisors to the Chinese government told MNI Wednesday. "Any promise would be
unlikely to be very specific. It's more likely to resemble a framework as the
problems won't have specific solutions in such a short period," Guan Tao, former
Director General of Balance of Payments at the State Administration of Foreign
Exchange, told MNI in an interview. "A discussion of yuan exchange rate
stability should not only impose responsibilities on China, but also require
cooperation from the U.S., such as by reducing trade frictions, slowing the pace
of Fed interest rate hikes, and maintaining a basically stable U.S. dollar,"
POLICY: The People's Bank of China (PBOC) said the opportunity to profit
from using bank bills to arbitrage between rates offered by different banks is
temporary, and the main beneficiary of the bill financing has been the real
economy. Commenting on its own daily the Financial News, PBOC attempted to fend
off criticisms that arbitraging was the main driver inflating the latest bill
financing figures. The window of opportunity to profit will close as structured
deposit rates return to a reasonable level, the PBOC said.
DATA: China's outbound direct investment in January fell 86.8% y/y to $9.19
billion, data by the Ministry of Commerce showed. The drops could be attributed
to tightened scrutiny by host nations, global economic slowdown and high base of
comparison, the ministry said. Investment in Belt and Road countries rose 8.1%
to $1.33 billion, shared among 47 countries, the ministry said, adding
"irrational investment" has been effectively curbed.
DATA: A total of CNY3.2 trillion bonds was issued in China's bond market in
January, PBOC's data show. Inter-bank money market turnover totaled CNY89.7
trillion, increasing 26.49% y/y; the transaction in inter-bank bond market
recorded CNY14.9 trillion, according to the PBOC.
LIQUIDITY: The PBOC skipped open market operations, leaving liquidity
unchanged as no reverse repos mature today, according to Wind Information. The
PBOC issued a total CNY71.9 billion of pledged supplementary lending (PSL) to
offset the peak tax season and the maturing treasury cash management.
RATE: The 7-day weighted average interbank repo average rate for depository
institutions (DR007) increased to 2.2800% from Wednesday's close of 2.2545%,
according to Wind Information. The overnight repo average rose to 2.0300% from
YUAN: The yuan appreciated to 6.7101 against the U.S. dollar from
Wednesday's close of 6.7236. The PBOC set the dollar-yuan central parity rate at
6.7220 today, lower than the 6.7558 set on Wednesday.
BONDS: The yield on the benchmark 10-year China Government Bond was last at
3.14%, down 2.2 bps from the close of Wednesday, according to brokers.
STOCKS: The benchmark Shanghai Composite Index declined 0.34% to 2,751.80.
Hong Kong's Hang Seng Index increased 0.41% to 28,629.92.
FROM THE PRESS: China has plenty of room to further lower banks' reserve
requirement ratios (RRR) as they are still higher than those of other major
economies, Premier Li Keqiang said in a State Council meeting on Wednesday. The
two RRR cuts in January were in line with market expectations, and liquidity has
been withdrawn properly during the cuts, Li said. China won't change its prudent
monetary policy nor will it pursue a "flooding" style of pro-growth measures, Li
The declining trend of China's PPI reflected reductions in the costs of
input, not a lack of liquidity, so it needs not be a cause for concern, the
Economic Daily said in a commentary. A falling PPI may hurt the industrial
sector, though it shouldn't be its sole performance indicator, the daily said.
--MNI Beijing Bureau; +86 (10) 8532-5998; email: email@example.com
--MNI Beijing Bureau; +86 10 8532 5998; email: firstname.lastname@example.org