MNI China Daily Summary: Wednesday, November 18

LIQUIDITY: The People's Bank of China (PBOC) injected CNY100 billion via 7-day reverse repos with rates unchanged at 2.2% on Wednesday. This resulted in a net drain of CNY50 billion given the maturity of CNY150 billion of reverse repos today, according to Wind Information. The operations aim to maintain the liquidity in the banking system reasonable and ample, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 2.1880% from close of 2.1826% on Tuesday, Wind Information showed. The overnight repo average fell to 1.7189% from the previous 1.7876%.

YUAN: The currency strengthened to 6.5425 against the dollar from 6.5580 on Tuesday. The PBOC set the dollar-yuan central parity rate lower at 6.5593, compared with the 6.5762 set on Tuesday.

BONDS: The yield on 10-year China Government Bond was last at 3.3200%, up from Tuesday's 3.2800%, according to Wind Information.

STOCKS: The Shanghai Composite Index gained 0.22% to 3,347.30, while the CSI300 index decreased by 0.06% to 4,891.67. Hang Seng Index edged up 0.49% to 26,544.29.

FROM THE PRESS: The signing of the Regional Comprehensive Economic Partnership between China and 14 other Asia-Pacific countries has fuelled the appreciation of the yuan against the U.S. dollar as many foreign investors believe the deal will boost the yuan's acceptance in the Asia Pacific region, the 21st Century Business Herald reported. With the amount of trade between China and Southeast Asian countries set to further increase, foreign trading companies need to have more yuan for commodity purchases and settlements, while dollar settlements are seen as risker due to the depreciation pressure, the newspaper said, citing an unnamed head of a Southeast Asian foreign trade company. Some investors projected the yuan to trade at 6.45-6.55 to the dollar, the newspaper added.

China's infrastructure investments may grow 7% y/y each month in November and December due to surging fiscal expenditure, the China Securities Journal reported, citing Zhu Jianfang, an economist from CITIC Securities. In the first 10 months, newly issued special-purpose local government bonds totalled 3.5 trillion yuan, a sharp rise from 2.1 trillion yuan a year ago, the newspaper said, citing Ministry of Finance data. In September, the government relaxed its policy and allowed some of the proceeds to be used as working capital for existing infrastructure projects, leading to a jump in such spending, the journal cited Li Qilin, a member of the China Chief Economist Forum, as saying. Such momentum will likely be carried into November and December, the journal said, citing Jin Yi, an analyst from Sealand Securities.

Chinese banks will boost the disposal of non-performing assets in Q4 by CNY1.67 trillion, the Economic Information Daily reported. Regulators will supervise banks to categorize assets, expose non-performing assets and reserve full provision for loan losses. Banks have disposed a total of CNY1.73 trillion of non-performing loans in the first three quarters, and the NPL rate was 1.96% by end-September, a rise of 0.02 percentage point from the previous quarter, the newspaper said.

China sees challenges in optimising economic structure and switching growth drivers, including the threat of a prolonged global recession from the pandemic and the backlash against globalisation, which could have an uncertain impact on global industrial and supply chains, Premier Li Keqiang wrote in the People's Daily commenting on the 2021-2025 plan. China must tackle lopsided development, boost innovation, address employment and income and increase environmental protection, Li said. The country must stick to its dual-circulation strategy boosting domestic demand as well as deepening its opening up and global cooperation, Li wrote.