MNI China Daily Summary: Thursday, January 19

EXCLUSIVE: China's reference lending rates are expected to remain unchanged in January as confidence about an economic recovery grows after the easing of Covid controls, and as measures to expand credit and shore up the property sector gain traction, advisors and analysts said.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY65 billion of operations via 7-day reverse repos and CNY467 billion via 14-day reverse repos with the rates unchanged at 2.00% and 2.15%, respectively. The operation led to a net injection of CNY467 billion after offsetting the maturity of CNY65 billion reverse repos today, according to Wind Information. The operation aims to hedge the impact of tax paying and cash injection peak to keep banking system liquidity stable before Chinese New Year, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 2.3543% from 2.2634% on Wednesday, Wind Information showed. The overnight repo average decreased to 1.5996% from the previous 1.9286%.

YUAN: The currency weakened to 6.7738 against the dollar from 6.7623 on Wednesday. The PBOC set the dollar-yuan central parity rate higher at 6.7674, compared with 6.760222 set on Wednesday.

BONDS: The yield on 10-year China Government Bonds was last at 2.9305%, down from Wednesday's close of 2.9375%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.49% to 3,240.28, while the CSI300 index was up 0.62% to 4,156.01. The Hang Seng Index was down 0.12% to 21,650.98.

FROM THE PRESS: The recent Liu-Yellen meeting signalled that China and the US must cooperate in the fields of finance, economics and trade, and the US should stop viewing the relationship as a zero-sum competition, according to an editorial by the Global Times. The positive tone of the meeting was a long overdue easing in the relationship amid a worsening economic outlook for 2023, the paper said. In the meeting, China expressed concern about US economic, trade and technological policies toward China, which impacted both sides. As the world's two largest economies, cooperation was an inescapable duty for the international community.

Cross border capital flows will remain stable in 2023 as China might be the only major economy with significant growth, said Wang Chunying, deputy director of the Foreign Exchange Bureau, according to Securities Daily. China will maintain a relatively large trade surplus as it promotes diversification of export markets and upgrades regional trade cooperation. With the economic recovery, the attractiveness of yuan assets will increase foreign investment in onshore securities, and China’s current account will maintain a reasonable surplus. The recent decline in inflation data in major developed economies may ease the pace of monetary tightening which will help capital inflows, he said.

China will improve its policies aimed at attracting foreign talent to China, Premier Li Keqiang told a gathering of international experts in Beijing. Measures on improving tax treatment, child schooling, visa issuance, and medical insurance would be taken to ease foreign worker conditions in China. Li said Beijing was willing to continue extensive international cooperation and adheres to protecting the interests of foreign investment in the country.