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TOP NEWS: China's policymakers will be focused on rebalancing the economy
next year, refraining from using stimulus packages to avoid worsening the
country's debt burdens, according to a leading economist. "There is no way" that
the economy will grow faster next year than it did this year, but will likely
register a still healthy 6.5%, Lu Zhengwei, the chief economist of Industrial
Bank of China, said in an interview Wednesday on the sidelines of a commodities
conference in Guangzhou. "The central government is just not too concerned about
growth," he said.
TOP NEWS: China's non-financial outbound direct investment (ODI) plunged
40.9% y/y to $86.31 billion in the first 10 months of the year, the Ministry of
Commerce said on Thursday, stressing that "irrational overseas investments,"
including in the real estate, sporting and entertainment sectors, had been
effectively curbed. The decline was smaller than the 41.9% y/y decrease in ODI
in dollar terms recorded in the first nine months of the year.
LIQUIDITY: The People's Bank of China injected CNY160 billion in seven-day
reverse repos, CNY140 billion in 14-day reverse repos and CNY30 billion in
63-day reverse repos via open-market operations. This resulted in a net
injection of CNY310 billion for the day, as a total of CNY20 billion in reverse
repos matured. A total of CNY122.5 billion in Medium-term Lending Facility (MLF)
loans also matured on Thursday. Taking into account the maturing MLF loans, the
PBOC injected a net of CNY187.5 billion into the banking system. The PBOC has
injected a net CNY820 billion in liquidity into the interbank market via
open-market operations so far this week. The PBOC explained in a statement
Wednesday that it was trying to offset the impact of lower liquidity from
government bond purchases, tax payments, bank reserve requirement payments and
expiring reverse repos to keep liquidity basically stable.
RATES: Money market rates were lower. The seven-day repo average was last
at 2.8770%, compared with Wednesday's average of 2.9759%. The overnight repo
average was at 2.7870%, compared with Wednesday's 2.8184%.
YUAN: The yuan was weaker against the U.S. dollar after the People's Bank
of China set the fixing rate weaker for the day. The yuan was last at 6.6341
against the U.S. unit, compared with the official closing price of 6.6298 on
Wednesday. The PBOC set the yuan central parity rate at 6.6286, 0.03% weaker
than Wednesday's 6.6263.
BONDS: The yield on benchmark 10-year China government bonds was last at
3.9250%, compared with the previous close of 3.9700%.
STOCKS: Stocks fell, dragged down by shares of securities companies. The
benchmark Shanghai Composite Index closed down 0.10% at 3,399.25. Hong Kong's
Hang Seng Index was 0.68% higher at 29,038.47.
FROM THE PRESS: The China Banking Regulatory Commission on Wednesday set
new capital adequacy guidelines for the government's three policy banks, the
Financial News, a journal run by the People's Bank of China, reported Thursday.
The three policy banks -- China Development Bank, Export-Import Bank of China,
and Agricultural Development Bank of China -- have been highly reliant on bond
issuance due to a lack of other stable and low-cost capital sources, which harms
their capacity to withstand risks and restrains their sustainable growth, the
report said. This is the first time the government has imposed capital
requirements on the policy banks, the report noted. (Financial News)
The modest growth of China's foreign exchange reserves in recent months is
hardly sustainable and has not created strong support to liquidity in the
interbank market, the China Securities Journal reported Thursday. The yuan
exchange rate is likely to suffer depreciation pressure and foreign exchange
reserves could decline in the period ahead given that the U.S. Federal Reserve
is expected to raise its benchmark interest rate in December and China's capital
outflows are likely to increase at the end of the year, the report warned. The
People's Bank of China has reduced its intervention in the foreign exchange
market, which means the forex position will not see a big jump, the report
argued. The open-market operations of the PBOC will focus on the effects of
fiscal spending and the forex position, so liquidity will remain tightly
balanced, the report noted. (China Securities Journal)
It is time to build up a long-term property market mechanism to implement
the principle that a "house is for living in, not for speculating on," the
Economic Information Daily said in a front page commentary Thursday. The policy
and capital sides of the market are ready to launch such a mechanism, the
commentary argued. As financial deleveraging has progressed, the flow of capital
into the property market has been curbed and speculation has shrunk, the
commentary said. A series of new government policies, including those supporting
joint-ownership houses and rental housing, is optimizing housing resources.
Regulators have started to ban the use of consumer loans to acquire property, so
the property market is moving forward in a healthier way, the commentary
stressed. (Economic Information Daily)
Credit risk is likely to increase in 2018 due to pressure from slowing
growth, falling producer prices and a peak in corporate profits, the 21st
Century Business Herald reported Thursday. As of the end of October, there have
been 32 corporate bonds defaults in both public and private markets so far this
year, the report said, citing China Chengxin International Credit Rating Co.,
the largest credit rating agency in China. The number of defaults has decreased
compared with 2016 due to China's improved economic performance and industrial
profits, the report noted. But stricter financial regulation and a tight funding
environment will trigger more credit risk cases, the report warned. (21st
Century Business Herald)
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