MNI China Daily Summary: Tuesday, November 23

POLICY: The Shenzhen branch of China's central bank said 20 banks in Shenzhen city have opened 5,079 accounts and processed CNY104 million in cross-border fund transfers under the Wealth Management Connect scheme in the first month after launch, according to a note sent to MNI by the branch.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY50 billion via 7-day reverse repos with the rate unchanged at 2.2%. This keeps the liquidity unchanged after offsetting the maturity of CNY50 billion repos today, 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) increased to 2.1573% from Monday's close of 2.0962, Wind Information showed. The overnight repo average rose to 2.1520% from 1.9562% on Monday.

YUAN: The currency weakened to 6.3845 against the dollar from Monday's close of 6.3759. The PBOC set the dollar-yuan central parity rate lower at 6.3929 on Tuesday, compared with 6.3952 set on Monday.

BONDS: The yield on 10-year China Government Bonds was last at 2.9275%, flat from Monday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index gained 0.20% to 3,589.09, while the CSI300 index edged up 0.02% to 4,913.35. The Hong Kong's Hang Seng Index fell 1.20% to 24,651.58.

FROM THE PRESS: China's economic growth may slow to 3.9% in Q4, possibly followed by a 5.1% rebound in Q1 2022, given sporadic Covid-19 outbreaks, increased commodity prices, a power crunch, declined auto production and sales amid chip shortages, and other factors, the 21st Century Business Herald reported citing Liu Yuanchun, vice president of Renmin University. Liu expects the downward pressure will be greatly eased next year with the repositioning of macro policies and the full implementation of the 14th Five Year Plan. He expects 2022 GDP may register 5.5%, slightly higher than the country's potential growth rate, the newspaper said. Liu also noted that the full liberalization of epidemic controls in Western countries next year may lead to supply chain readjustment and largely impact China's imports and exports, while the Fed's gradual monetary tightening will also bring uncertainties, the newspaper said.

Sales of local government bonds in China this year will exceed CNY7 trillion to set a record, compared to the previous high of CNY6.44 trillion in 2020 amid a great fiscal expansion to offset the pandemic impact, the 21st Century Business Herald reported, also noting that the local government debt ratio has reached 100%. The local debt expansion this year is mainly due to the large increase in refinancing bonds which rose by 53% y/y to CNY2.9 trillion, aiming to help resolve local governments' off-balance-sheet debts and roll over matured government bonds, the newspaper said. Meanwhile, local governments are intensively reporting new infrastructure projects for 2022, and the central government may front-load some of next year's special bond quota to help promote these projects so to stabilize economic growth, the newspaper said citing insiders.

China's loan interest rate has limited downward room as the central bank kept the benchmark Loan Prime Rate unchanged for 19 consecutive months on Monday, the Shanghai Securities News reported citing analysts. The PBOC left out wording of "promoting a further reduction in actual loan interest rates" in its Q3 monetary policy report published last week, which may indicate that it is satisfied with the current interest level. That means it may work on facilitating finance channels to reduce financing costs instead of sharply cutting rates, the newspaper said citing Ming Ming, deputy research head of CITIC Securities. Though analyst Wang Qing with Golden Credit Rating said the interest rate of one-year LPR can still be cut by 0.05 to 0.1 percentage point should the central bank implement another RRR cut by the end of this year to encourage banks to boost lending, the newspaper said.