MNI China Daily Summary: Tuesday, Feb 4

POLICY: China will impose new tariffs on U.S goods and control trade with some American companies in retaliation to the extra 10% duties revealed, according to the Ministry of Finance and the Ministry of Commerce.

POLICY: China is ready to work with international partners to safeguard the multilateral trading system, Lou Qinjian, spokesperson for the National People’s Congress said, answering a reporter's question regarding the U.S. additional 10% tariff on Chinese goods.

LIQUIDITY: The PBOC conducted CNY38.2 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY280.3 billion after offsetting the maturity of CNY318.5 billion today, according to Wind Information.

RATES: China's seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.7659% from 1.8599%, Wind Information showed. The overnight repo average decreased to 1.7438% from the previous 1.7877%.

YUAN: The currency strengthened to 7.2788 from 7.2931 against the dollar from Monday. The PBOC set the dollar-yuan central parity rate lower at 7.1739, compared with 7.1745 set on Monday. The fixing was estimated at 7.2782 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.7150% up from 1.7125% at Monday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.22% to 3,324.21 while the CSI300 index fell 0.08% to 3,885.22. The Hang Seng Index was down 0.28% to 22,941.77.

FROM THE PRESS: The People’s Bank of China should retain its 3% inflation target and resist calls for 2% given the nation remains a developing country with a per capita GDP of around USD10,000, making a lower goal less conducive to economic vitality, according to Li Yongning, associate professor at the School of Economics of Tianjin Polytechnic University. China's shift from a prudent to a moderately loose monetary policy in 2025 would contradict an inflation target cut and send mixed signals to the market, Li noted. Instead, authorities should extend the 3% aim from an annual to longer duration timespan, such as over a government term or economic cycle, Li added.

China will take countermeasures to safeguard its interests and hopes the U.S. can return to the right track of properly resolving differences via dialogue as soon as possible, said the spokesperson for the Ministry of Commerce, following the U.S. imposing an additional 10% tariff on Chinese goods starting Mar 4. China urges the U.S. to respect the rights of other countries and immediately withdraw the unreasonable unilateral tariff measures that harm others without benefiting itself. (Source: MOFCOM website)

Foreign investment in Chinese assets will likely maintain steady growth in 2025, supported by the economic rebound amid increased fiscal spending and relatively low asset valuations, Shanghai Securities News reported, citing Tian Xuan, delegate of National People's Congress. Investors can find opportunities in areas such as consumption, electricity, and energy, while investing in Chinese assets further diversifies risks from global uncertainty, said Tian, who suggested further efforts to attract investment and talent from the overseas Chinese community.