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TOP NEWS: China's policymakers pledged Tuesday to conduct countercyclical
moves and push through tax cuts to boost growth as the economy continues to face
headwinds, officials from the People's Bank of China(PBOC), Ministry of Finance
and the National Development and Reform Commission said at a joint briefing.
POLICY: China will press on with economic liberalization in 2019, making it
easier to resolve a trade dispute with the U.S., former commerce minister Wei
Jianguo told MNI in an interview. Policies could include reforms of state
subsidies and of state-owned enterprises and improving market access for foreign
financial institutions, Wei said. Many of these coincide with demands made by
the U.S. in trade talks, making an agreement likely within the 90-day window
agreed by presidents Xi Jinping and Donald Trump, he said.
DATA: M2 in December grew by 8.1% y/y, missing the forecast 8.2% by an MNI
survey, but still stronger than 8% in November. New loans totaled CNY1.08
trillion in December, compared with CNY800 billion projected by an MNI survey
and CNY1.25 trillion in November. Total social financing (TSF) surged to CNY1.59
trillion from CNY1.52 trillion in November, beating the CNY1.25 trillion
projected by an MNI survey. The gain was mainly due to the smaller reduction of
shadow banking and the gain in corporate bonds.
LIQUIDITY: The PBOC injected CNY80 billion via 7-day reverse repos, and
CNY100 billion through 28-day reverse repos. It resulted in a net injection of
CNY180 billion given no reverse repos maturing today, according to Wind
Information. There is also a CNY390 billion of Medium-term Lending Facility
matured today, Wind said. The PBOC said cash demand has increased due to annual
tax payments, so the total liquidity in the banking system is expected to fall
rapidly in the next few days.
RATE: The 7-day weighted average interbank repo rate for depository
institutions (DR007) increased to 2.6463% from Monday's close of 2.5446%, Wind
data showed. The overnight repo average increased to 2.2414% from Monday's
Yuan: The yuan appreciated to 6.7544 against the U.S. dollar from Monday's
close of 6.7578. The PBOC set the yuan's central parity rate against the dollar
at 6.7542, with the Chinese currency strengthening from the 6.7560 set on
Monday. Today's parity was the strongest set since Jul 19, 2018.
STOCKS: The benchmark Shanghai Composite Index up 1.36% to 2,570.34. Hong
Kong's Hang Seng Index increased 2.02% to 26,830.29.
BONDS: The yield on the benchmark 10-year China Government Bond was last at
3.1450%, up from Monday's closing 3.1400%, according to Wind Information.
FROM THE PRESS: China must rely on reform and opening up to stimulate
'market vitality', counting on it to withstand downward pressure on the economy
and keep growth at reasonable levels, Premier Li Keqiang told a State Council
executive meeting yesterday. Li said the Chinese economy is facing an increasing
downward pressure. The government won't pursue "a flood" of stimulus, but use
targeted measures, Li said.
Withdrawal of foreign capital, suspension of investment projects, along
with new entry and reinvestment by foreign investors are all ordinary market
behavior and unnecessary to fuss over, the People's Daily Overseas Edition said
today in a commentary piece wrote by Liu Xiangdong, the deputy director of the
Economic Research Department at the China Center for International Economic
Exchanges. Foreign investors tend to withdraw their investment mainly in China's
low-end manufacturing area, the result of industrial transfer, Liu said.
Fourteen provinces including Henan, Fujian and Yunnan will issue more than
CNY240 billion local government bonds in January, responding to the central
government's order to accelerate and complete the issuance of CNY1.39 trillion
LGBs by end September, Securities Daily said. Infrastructure and public service
projects will become the main driver of growth in the future, so more local
bonds are expected to be issued in these areas, the daily said citing Tang
Chuan, research director at 360 PPP Research Center.
--MNI Beijing Bureau; +86 (10) 8532-5998; email: email@example.com
--MNI Beijing Bureau; +86 10 8532 5998; email: firstname.lastname@example.org