MNI China Daily Summary: Tuesday, November 15

EXCLUSIVE: The growth of China’s yuan as a reserve currency is being driven by its use in a developing industrial chain based on cheap Russian raw materials and southeast Asian labour, as the yuan will not be completely convertible for the foreseeable future, one of the country’s most prominent experts on the subject told MNI.

DATA: Retail sales fell 0.5% in October to hit a five-month low, reversing the 2.5% growth seen in September and missing the median forecast for a 0.7% increase, data released by the National Bureau of Statistics (NBS) showed. Industrial production rose 5% y/y in October from September's 6.3%, missing the consensus forecast for a 5.2% rise. Fixed-asset investment edged down slightly to 5.8% y/y in the first ten months, compared to the 5.9% gain in the Jan-Sep period. This underperformed the median forecast for a 5.9% rise.

POLICY: China will strengthen policy support to bolster domestic demand and stabilise employment as growth is pressured by the global slowdown and measures to control renewed Covid outbreaks, said NBS spokesman Fu Linghui in a briefing.

POLICY: The U.S. and China should seek to understand each other's domestic and foreign policies, strategic intentions, and establish a tone of dialogue rather than confrontation, China's Minister of Foreign Affairs Wang Yi said at a press conference, where he outlined details of the meeting between President Xi Jinping and President Joe Biden In Bali.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY172 billion via 7-day reverse repos and CNY850 billion 1-year medium-term lending facilities with the rate unchanged at 2.00% and 2.75%, respectively. The operation led to a net injection of CNY20 billion after offsetting the maturity of CNY2 billion reverse repos and CNY1 trillion MLFs today, according to Wind Information. The operation aims to offset the impact of tax season and the operation has fully met the needs of financial institutions, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.9429% from the close of 1.8403% on Monday, Wind Information showed. The overnight repo average rose to 1.8493% from the previous 1.6544%.

YUAN: The currency strengthened to 7.0335 against the U.S. dollar from the previous close of 7.0378. The PBOC set the dollar-yuan central parity rate lower at 7.0421, compared with 7.0899 set on Monday.

BONDS: The yield on the 10-year China Government Bond was last at 2.8150%, down from Monday's close of 2.8390%, according to Wind Information.

STOCKS: The Shanghai Composite Index gained 1.64% to 3,134.08, while the CSI300 index rose 1.90% to 3,865.97. Hong Kong's Hang Seng Index rallied 4.11% to 18,343.12.

FROM THE PRESS: Financial officials from China and the U.S. will conduct dialogue and coordination on macroeconomic policies, economic and trade issues, CCTV News reported late Monday following the meeting between Chinese President Xi Jinping and his U.S. counterpart in Bali. Xi emphasised that trade and tech wars, and “decoupling and breaking off supply chains” completely violate the principles of the market economy and undermine the rules of international trade, while both countries still have common interests in post-pandemic economic recovery, climate change and the resolution of regional issues. The two heads of state believed the meeting was candid and constructive and instructed the working teams to implement the important consensus reached during the meeting and take practical actions to push China-U.S. relations back to the track of stable development, CCTV said.

Real estate developers will be allowed to make use of some pre-sale housing funds held in escrow accounts in exchange for permission to sell residential projects before completion, the latest step to resolve the liquidity crunch confronting developers, the 21st Century Business Herald reported citing a statement published by China Banking and Insurance Regulatory Commission on its website. Developers can apply to commercial banks for a letter of guarantee to withdraw certain percentages of pre-sale funds from escrow accounts, and the funds obtained shall be prioritised to construct projects and repay debts, but banned from land acquisition, new investment or repaying loans by shareholders, the statement said.

Private and small companies temporarily affected by the Covid-19 epidemic are allowed to extend loan repayments due in Q4 to mid-2023, Yicai.com reported citing a document released by the central bank and five other departments on Monday. The repayment of principal and interest can be extended up to June 30, 2023, with normal interest rates to apply without penalty. The support is expected to see SME loans maintain a high growth rate above 25% by year-end, accelerating from the 24.6% growth at the end of Q3, Yicai said citing Wang Qing, chief analyst with Golden Credit Rating. This is the fifth time regulators have deferred repayments for SMEs since 2020, playing an important role in helping SMEs avoid a cash crunch, the newspaper added.