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TOP NEWS: China must present detailed plans to promote mixed-ownership
reform of state-owned companies in the next three years, including measures to
strengthen the supervision of SOEs, reduce and standardize subsides, enhance R&D
and innovation capabilities, as well as improve labor productivity and return on
capital, Vice Premier Liu He said in a statement on the government's website.
LIQUIDITY: The People's Bank of China (PBOC) skipped open market operations
for the fifth trading day, leaving liquidity unchanged, according to Wind
Information. The level of liquidity in the banking system is reasonable and
ample, the PBOC said.
RATES: The seven-day weighted average interbank repo rate for depository
institutions (DR007) rose to 2.6280% from 2.4963% on Monday, Wind Information
showed. The overnight repo average increased to 2.3573% from 2.0296% on Monday.
YUAN: The yuan strengthened to 7.0028 against the dollar from 7.0065 on
Monday. PBOC set the dollar-yuan central parity rate lower for the first time in
five trading days at 6.9988, compared with Monday's 6.9933.
BONDS: The yield on 10-year China Government Bonds was last at 3.2500%, up
from the close of 3.2100% on Monday, according to Wind Information.
STOCKS: The Shanghai Composite Index edged up 0.17% to 2,914.82, with
shares related to Hainan island leading the gain and infrastructure stocks
recovered. Hong Kong's Hang Seng Index increased 0.52% to 27,065.28.
FROM THE PRESS: China doesn't face deflation and has room for proactive
fiscal measures supported by monetary policies, China Business News reported
citing Sheng Songcheng, the former director of the Survey and Statistics
Division of PBOC. Monetary policy should not be eased further, but there is a
need for structural adjustment, said Sheng. Lowering the rate of medium-term
lending facility (MLF) or loan prime rate (LPR) is better in reducing the cost
of financing than a reserve requirement ratio (RRR) cut, the newspaper said.
PBOC is unlikely to cut MLF rate if it rolls over the maturity of CNY187.5
billion, the Securities Daily reported citing Yuan Yacheng, a senior researcher
at Minsheng Bank. After the MLF rate cut last week, PBOC may slow the pace of
further easing, given rising inflation and further tightening of the real estate
sector. PBOC may also roll over reverse repos to fill in the liquidity gap by
year-end, Cheng said according to the daily.
China may issue up to CNY3.35 trillion infrastructure-backed
special-purpose bonds next year given the need for debt swaps and boosting
growth, said Ming Ming, the chief analyst at CITIC Securities in a report. If
one-fourth of the new bonds, or around CNY840 billion, goes towards funding
infrastructure, infrastructure investment is likely to accelerate to 5.5-6%,
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