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Free AccessMNI China Daily Summary: Tuesday, December 28
LIQUIDITY: The People's Bank of China (PBOC) injected CNY200 billion via seven-day reverse repos with the rate unchanged at 2.2% on Tuesday. This operation has injected net CNY190 billion after offsetting the maturity of CNY10 billion repos, according to Wind Information. The operation aims to maintain the liquidity stable towards year-end, the PBOC said on its website.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 2.2870% from Monday's close of 2.4156%, Wind Information showed. The overnight repo average fell to 1.5730% from 1.7692% on Monday.
YUAN: The currency strengthened to 6.3713 against the dollar from Monday's close of 6.3725. The PBOC set the dollar-yuan central parity rate higher at 6.3728 on Tuesday, compared with 6.3686 set on Monday.
BONDS: The yield on 10-year China Government Bonds was last at 2.8450%, down from Monday's close of 2.8600%, according to Wind Information.
STOCKS: The Shanghai Composite Index edged up 0.39% to 3,630.11, while the CSI300 index rose 0.74% to 4,955.96. The Hong Kong's Hang Seng Index gained 0.24% to 23,280.56.
FROM THE PRESS: The Chinese yuan could further strengthen to around 6.3 against the U.S. dollar despite a possible hike in interest rates by the Federal Reserve ahead, as it is supported by robust trade and the steady recovery of the Chinese economy, the 21st Century Business Herald reported citing analysts. The PBOC has abundant monetary policy tools to curb any rapid and disorderly appreciation of the yuan, including increasing the foreign exchange deposit reserve ratio to control capital inflows, as well as releasing new QDII quotas and lowering the FX risk reserve ratio for forward forex trading to expand capital outflows, the newspaper said citing Guan Tao, a former forex official. China should increase trade settlement in yuan, increase QDII quotas, and support domestic institutions to purchase FX for foreign investment, so to ease appreciation pressure, Guan said.
The People’s Bank of China will keep its prudent monetary policy flexible and boost stable growth of credit to support the real economy, according to a statement on the PBOC website following a year-end meeting outlining the work for next year. The PBOC said it would aim to increase fluctuations in the Chinese yuan while keeping it stable on a reasonable and balanced level. The central bank will also improve market-based pegging of interest rates to reduce financing costs for companies, while targeting financial support for SMEs, technology innovation and carbon emission reduction, the statement said.
China is likely to cut more than CNY1 trillion of taxes and fees in 2020, to support SMEs, downstream manufacturers impacted by higher commodity prices and weakened demand as well as tech companies, Yicai.com reported citing analysts following a meeting outlining the fiscal work for next year. Meanwhile, the government will continue with a tight grip on local implicit debts while strengthening the supervision of infrastructure-backed local government special bonds, the newspaper said citing analysts. The quota of special bonds may be slightly lower than this year’s CNY3.65 trillion, and the fiscal deficit ratio may be the same as or slightly lower than the 3.2% in 2021, the newspaper said citing Professor Shi Zhengwen at China University of Political Science and Law.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.