MNI China Daily Summary: Tuesday, January 4

DATA: Caixin China's manufacturing PMI for December rebounded 1.0 points on month to 50.9 to hit the highest level since July 2021 and back above the breakeven 50, indicating accelerated manufacturing activities, financial publisher Caixin said on Tuesday. The manufacturing industry in December saw robust supply and recovered demand.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via seven-day reverse repos with the rate unchanged at 2.2%. This operation has drained net CNY260 billion after offsetting the maturity of CNY270 billion reverse repos, according to Wind Information. The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 2.0168% from the close of 2.2916% on Dec. 31, Wind Information showed. The overnight repo average fell to 1.8733% from 2.0324% on Friday, the last working day before the New Year holiday.

YUAN: The currency weakened to 6.3745 against the dollar from Monday's close of 6.3730. The PBOC set the dollar-yuan central parity rate higher at 6.3794, compared with 6.3757 set before the holiday.

BONDS: The yield on 10-year China Government Bonds was last at 2.8300%, up from Friday's close of 2.8200%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.20% to 3,632.33, while the CSI300 index fell 0.46% to 4,917.77. The Hong Kong's Hang Seng Index gained 0.06% to 23,289.84.

FROM THE PRESS: Local governments in China are planning to kick off major projects in Q1, with 16 provinces seeking to issue over CNY550 billion new infrastructure-back special bonds in Q1, China Securities Journal reported. This compares to a total of CNY36.4 billion of new local government bonds issued same period last year. Infrastructure investment is expected to grow 6.5% y/y in 2022 to drive the economy, the newspaper said citing analysts with CITIC Securities. Local authorities will increase project reserve and halve the processing time from approval to start of construction, with investment in new energy, green buildings, pipeline networks and parking lots to increase significantly, the newspaper said.

The largest free trade agreement Regional Comprehensive Economic Partnership (RCEP) coming into force since Jan. 1 will drive the regional GDP by 2035, as well as boost exports and imports of the region, Yicai.com reported citing a think tank affiliated with the Ministry of Commerce. The Asia-focused trade bloc covering 15 countries will see more than 90% of goods trade in the region gradually achieve zero tariffs. Among which, 57% of China’s export to Japan will immediately enjoy zero tariffs for the first time, and both sides have significantly reduced tariffs on machinery and equipment, electronic information, chemicals and textiles, which is expected to largely buoy trade, the newspaper said citing Ren Hongbin, vice-minister of commerce.

Chinese property developers will remain cautious about expanding investment in 2022, as it would take three-to-six months for investment after the RRR cuts and other easing signals for real estate financing released at end-2021, said Quanshang China, a social media outlet under the Securities Times. The total land purchase by top 100 developers dropped by 21.5% y/y in 2021, with the ratio of land purchase to sales dropping to a record low in the past five years, the newspaper said citing the China Index Academy. Developers were facing greater debt repayment and cash flow pressure since end-Q3 amid successive financial regulation, and most developers failed to acquire any land in Q4 last year, the newspaper said.