MNI China Daily Summary: Tuesday, November 22

EXCLUSIVE: The reference rate used to price Chinese mortgages is expected to be cut next month after being held steady in November, with banks to lend support to the property market recovery despite rising interbank funding costs, advisers and analysts said. The Loan Prime Rate, which is based on the rate of the People’s Bank of China’s Medium-term Lending Facility and quotes submitted by 18 banks, remained at 3.65% for the one-year maturity and 4.3% for over-five-year maturity on Monday, which was in line with market expectations.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY2 billion via 7-day reverse repos with the rates unchanged at 2.00%. The operation led to a net drain of CNY170 billion after offsetting the maturity of CNY172 billion reverse 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) decreased to 1.6198% from the close of 1.6416% on Monday, Wind Information showed. The overnight repo average fell to 0.8719% from the previous 1.0776%.

YUAN: The currency strengthened to 7.1384 against the U.S. dollar from the previous close of 7.1630. The PBOC set the dollar-yuan central parity rate higher at 7.1667, compared with 7.1256 set on Monday.

BONDS: The yield on the 10-year China Government Bond was last at 2.8350%, up from Monday's close of 2.8200%, according to Wind Information.

STOCKS: The Shanghai Composite Index gained 0.13% to 3,088.94, while the CSI300 index edged up 0.01% to 3,769.57. Hong Kong's Hang Seng Index lost 1.31% to 17,424.41.

FROM THE PRESS: The PBOC is set to provide CNY200 billion of interest-free refinancing funds to commercial banks to ensure the delivery of unfinished housing projects, Yicai.com reported. It will support the accelerated construction and delivery of projects that have been sold but are overdue and have been identified by the financial management department. It is a new phased policy, aiming to reassure banks and local governments to offer help and resolve outstanding loan risks, the newspaper said. The program is currently seeking industry comments, Yicai added.

The yuan will continue to be resilient during the current U.S. dollar appreciation cycle, and is increasingly considered a “safe haven”, Pan Gongsheng, Vice Governor of PBOC and director of the State Administration of Foreign Exchange, told the 2022 Financial Street Forum annual meeting on Monday. Pan said the yuan's resilience reflects its two-way floating exchange rate, China’s current account surplus, relatively stable cross border capital flows, the yuan's increasing internationalisation, and use of hedging tools. He believed the US dollar appreciation cycle may be peaking, and the recent 20-point Covid-control relaxation plan and 16-point real-estate package would support China's growth.

China should set its 2023 growth target at around 5%, which would match the country’s potential growth level, support employment, prevent risks and boost market confidence, 21st Century Business Herald reported citing Zhu Baoliang, chief economist of the State Information Center. Given the low base this year, the economy is expected to achieve a growth rate of 5% or even higher, as real estate investment may stop declining and retail sales could rebound, the newspaper said citing Zhang Yongjun, deputy chief economist at China Center for International Economic Exchanges. Zhang added that next year’s proactive fiscal policy should be strengthened, and monetary policy should remain relatively loose, the newspaper said.