MNI China Daily Summary: Tuesday, January 12

EXCLUSIVE: China can lift consumption immediately by tapping the purchasing power of its lower-income population with more affordable, customised products as demand-side reforms aimed at improving wages and enlarging the middle class will take years to make a difference, a State Counsellor told MNI. Current measures to boost consumption are tilted toward the urban consumer while there is unmet demand from the 1 billion people who have relatively lower incomes and more time and some cash to spend, said Tang Min, a senior advisor to China's State Council.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY5 billion via 7-day reverse repos with the rate unchanged on Tuesday. This resulted in a net drain of CNY5 billion given the maturity of CNY10 billion of reverse repos today, according to Wind Information. The operations aim to maintain the liquidity in the banking system at a reasonable and ample level, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) dropped to 1.8552% from the 1.9394% on Monday, Wind Information showed. The overnight repo average increased to 1.3325% from the previous 1.2117%.

YUAN: The currency strengthened to 6.4670 against the dollar from 6.4748 on Monday. The PBOC set the dollar-yuan central parity rate higher for a fourth day at 6.4823, comparing with the 6.4748 set on Monday.

BONDS: The yield on 10-year China Government Bond was last at 3.1950%, down from Thursday's 3.2100%, according to Wind Information.

STOCKS: The Shanghai Composite Index increased 2.18% to 3,608.34 while the CSI300 index increased by 2.85% to 5,596.35. Hang Seng Index increased by 1.32% to 28,276.75.

FROM THE PRESS: China faces unprecedented opportunities for development and has "time on its side," but must accelerate building the new dual-circulation model through further supply-side reform, Communist Party General Secretary Xi Jinping said at a conference of top central and provincial party leaders,. According to a readout of the meeting from the Xinhua News Agency, Xi also said that China must increase its ability to innovate and compete, and steadily build a "super-sized" domestic market to ensure a high level of self sufficiency. Xi reportedly reminded his cadres to be prepared for risks as the global balance of power shifts, and ensure that political stability, people's safety and national interests are tied together.

China's CPI is forecast at a moderate 1.5% this year, leaving more room for monetary policies, the China Securities Journal reported citing analysts. A rebound in global demand later in the year and the rollout of vaccines against the Covid-19 virus will drive prices of energy and other commodities, although rising pork output will limit food inflation, the newspaper reported citing Zhou Maohua, an analyst from China Everbright Bank.

China's Ministry of Commerce has effectively blocked Chinese entities from following foreign sanctions deemed harmful to its national interests, the official China Daily said on Tuesday in an editorial. Measures introduced by the ministry on Saturday give Chinese entities legal protection from some foreign laws while letting them demand compensation from foreign entities in domestic courts, wrote the newspaper. Foreign laws against international norms will also be deemed invalid, the newspaper reported.