MNI China Daily Summary: Thursday, January 4

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY15 billion via 7-day reverse repo, with the rates unchanged at 1.80%. The reverse repo operation has led to a net drain of CNY585 billion reverse repos after offsetting CNY600 billion maturity today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.7671% from 1.7706%, Wind Information showed. The overnight repo average fell to 1.5716% from 1.5767%.

YUAN: The currency weakened to 7.1520 against the dollar from 7.1434 on Wednesday. The PBOC set the dollar-yuan central parity rate lower at 7.0997, compared with 7.1002 set on Wednesday. The fixing was estimated at 7.1488 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.5900%, down from Wednesday's close of 2.6025%, according to Wind Information.

STOCKS: The Shanghai Composite Index closed down 0.43% at 2,954.35, while the CSI300 index fell 0.93% to 3,347.05. The Hang Seng Index ended flat at 16,645.98.

FROM THE PRESS: Authorities should comprehensively examine inefficient investments totalling over CNY20 trillion every year, and reallocate fiscal funds to increase resident income, improve social security and subsidise consumer spending to help achieve over 5% economic growth in 2024, said Teng Tai, president at Wanbo New Economic Research Institute. The current multiplier effect of each unit of fiscal spending on investment is less than one, but the effect would be greater than three if used to issue consumer coupons, said Teng. This requires reforms of government decision-making and execution mechanisms to achieve the shift from an investment-driven to a consumption-driven economy, Teng added. (Source: Yicai)

China should improve its local tax system to boost local government income as the old model of heavy reliance on land-sale revenue and transfer payments from higher-level governments is unsustainable, 21st Century Business Herald reported, citing analysts. It is high time to reform consumption tax, including giving local governments more tax collection authority and adjusting the scope of taxable items and tax rates, said Sun Kunpeng, associate professor at Central University of Finance and Economics. The Central Economic Work Conference in December indicated a new round of fiscal and taxation reform will begin soon.

Authorities should focus on the increase in industrial enterprises' corporate accounts receivable and overdue debts caused by insufficient demand, and implement policies to consolidate the rebound in industrial profits, 21st Century Business Herald reported, citing analysts. China's industrial profits rose by 29.5% y/y in November, on top of a 2.7% increase in October, achieving positive growth for four consecutive months. It is necessary to support financial institutions to develop intangible-asset-pledge financing services by accepting intellectual property rights, trademark rights, orders, and scientific and technological achievements, as well as to increase medium- and long-term loans and subsidised loans for manufacturers, said Guan Bing, head of industrial economics of CCID Research Institute.