MNI China Daily Summary: Tuesday, October 29
LIQUIDITY: The People's Bank of China (PBOC) conducted CNY382.8 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net injection of CNY224.4 billion after offsetting the maturity of CNY158.4 billion today, according to Wind Information.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.8064% from the previous 1.7216%, Wind Information showed. The overnight repo average decreased to 1.4484% from 1.4971%.
YUAN: The currency weakened to 7.1417 against the dollar from the previous 7.1273. The PBOC set the dollar-yuan central parity rate lower at 7.1283, compared with 7.1307 set on Monday. The fixing was estimated at 7.1289 by Bloomberg survey today.
BONDS: The yield on 10-year China Government Bonds was last at 2.1425%, up from the close of 2.1400% previously, according to chinamoney.com.cn.
STOCKS: The Shanghai Composite Index was down 1.08% to 3,286.41, while the CSI300 index fell 1.00% to 3,924.65. The Hang Seng Index gained 0.49% at 20,701.14.
FROM THE PRESS: The PBOC is likely to cut the reserve requirement ratio in Q4 to boost liquidity and stands ready to lower the medium-term lending facility rate further depending on financial data results, the Economic Information Daily reported, citing analysts. The central bank launched its outright reserve repo tool this week to smooth funding fluctuations caused by the large-scale maturity of MLFs and provide a favourable environment for the economic rebound, said Dong Ximiao, chief researcher at Merchants Union Consumer Finance. As a result, the PBOC will not make large MLF rollovers in November and December, and the facility’s status as the policy rate will be further diluted, Dong added.
China’s State Council has announced measures aimed at supporting child care, including raising deductions on personal income tax for people with children under three years old, Yicai has reported. Shi Zhengwen, a tax expert at the China University of Political Science and Law, expects the circular will lead to special deductions for infant care and education increased to CNY3,000 a month, following last year’s raise to CNY2,000 from CNY1,000. However, Tian Zhiwei, deputy dean of public policy at Shanghai University of Finance and Economics, said the move’s effectiveness remains limited given the proportion of people paying income tax remains relatively small.
China’s electricity demand is expected to rise about 7% this year, following 2023’s 6.7%, as high temperatures drove fast consumption growth over the first three quarters, the China Electricity Council’s latest report said. High growth rates in August and September had exceeded expectations and were driven by hot weather conditions in the southwest, east and central regions, the report noted. The industrial sector remained the nation's main consumer, accounting for 64.0% of total electricity demand in the first three quarters and contributing 48.9% to the growth rate.