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TOP NEWS: Central bank research head Xu Zhong noted earlier that downward
pressure on the economy has increased significantly and that China should
implement more proactive fiscal policy as monetary policy is less effective at
stimulating growth. --Comment: This should put upside pressure on rates given
the potential for inflationary fiscal stimulus which could suggest that
widespread expectations of further monetary easing before year-end are
POLICY: China needs to raise the deficit-to-GDP ratio above 3% in 2019 by
boosting infrastructure investment, thus prevent further economic slowdown, Ming
Ming, chief analyst at CITIC Securities, wrote in a report. Such government-led
investment in public facilities needs to increase about 8% next year, or an
increment of CNY1.2 trillion, to achieve 7% growth in fixed asset
investment(FAI) and ultimately support nominal GDP growth of about 10%, Ming
LIQUIDITY: The People's Bank of China (PBOC) skipped open market operations
(OMOs) for the 18th straight day Tuesday, leaving liquidity unchanged, as no
reverse repos mature, according to Wind Information. The central bank said
liquidity in the banking system remains reasonable and ample.
RATES: The 7-day weighted average interbank repo average rate for
depository institutions (DR007) increased to 2.6698% from Monday's close of
2.6327%, Wind Information showed. The overnight repo average rose to 2.6011%
from Monday's 2.5529%.
YUAN: The yuan appreciate to 6.9420 against the U.S. dollar after Monday's
close of 6.9429. The PBOC set the dollar/yuan central parity rate higher for the
first time in five days at 6.9280 Tuesday, compared with Monday's 6.9245.
BONDS: The yield on the benchmark 10-year China Government Bond was last at
3.3750%, flat from the closing price on Monday, according to Wind Information.
STOCK: The benchmark Shanghai Composite Index closed 2.13% lower at
2,645.85, and Hong Kong's Hang Seng Index dropped 2.02% to 25,840.34.
FROM THE PRESS: The PBOC's recent move to increase or confirm currency
swaps arrangements can help in the hedging of exchange rate risk, reduce
exchange costs and facilitate international financing and trade, China Business
News reported Tuesday, citing Bian Quanshui, macroeconomic analyst at Sinolink
Securities. As an additional source of liquidity in offshore markets, currency
swaps can also be used as a policy tool to stabilize the yuan rate and maintain
financial market stability, the report said, citing Bian. The PBOC has reached
or reconfirmed three currency swap deals in a month, with Bank of Indonesia, the
Bank of England and the Bank of Japan, the report said. (Link to the story:
The China Banking and Insurance Regulatory Commission (CBIRC) is currently
formulating a series of policies to ease financing difficulties for
private-sector companies, and is likely to release a guideline to support
private sector development this week, said the Shanghai Securities News Tuesday,
citing Zhou Liang, deputy director of CBIRC. The policies are aimed at removing
blockages between the finance sector and the real economy, the newspaper
reported, citing Zhou. (Link to the story: https://bit.ly/2ziCBlN)
Instead of just gesturing, local governments should focus on implementing
actual and effective measures to support private-sector companies, avoiding
short-term fixes, the Economic Information Daily said Tuesday in a front-page
commentary. To restore the confidence of private enterprises, it requires
coordination of monetary, fiscal and industrial policies. In particular, the
government must treat private companies equally with SOEs, reform law, tax and
management systems and remove barriers that are not conducive to helping private
enterprises grow. (Link to the story: https://bit.ly/2KfOoFJ)
--MNI Beijing Bureau; +86 (10) 8532-5998; email: firstname.lastname@example.org
--MNI Beijing Bureau; +86 10 8532 5998; email: email@example.com