MNI China Daily Summary: Wednesday, January 12

DATA: China's December consumer price index eased to 1.5% y/y from 2.3% in November, below the median forecast of 1.7%, according to the National Bureau of Statistics on Wednesday. China's producer price index measuring factory gate prices further eased for the second month to 10.3% from November's 12.9%, underperforming a forecast of 11.3%.

DATA: China's M2 money supply growth quickened to 9.0% y/y in December from November's 8.5%, hitting the highest level since April 2020 and outshining the median forecast of 8.6%, data released by the People's Bank of China showed. Aggregate financing was CNY2.37 trillion, slightly down from CNY2.61 trillion in November, basically in line with the forecast of CNY2.40 trillion. New loans edged down to CNY1.13 trillion from the previous CNY1.27 trillion, also lower than the median forecast of CNY1.25 trillion.

LIQUIDITY: The PBOC injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.2% on Wednesday. This keeps the liquidity unchanged after offsetting the maturity of CNY10 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) decreased to 2.0798% from the close of 2.0938% on Tuesday, Wind Information showed. The overnight repo average rose to 1.9816% from the previous 1.9733%.

YUAN: The currency strengthened to 6.3646 against the dollar from 6.3718 on Tuesday. The PBOC set the dollar-yuan central parity rate lower at 6.3658, compared with 6.3684 set on Tuesday.

BONDS: The yield on the 10-year China Government Bond was last at 2.8325%, down from Tuesday's close of 2.8375%, according to Wind Information.

STOCKS: The Shanghai Composite Index gained 0.84% at 3,597.43, while the CSI300 index rose 1.00% to 4,845.58. Hang Seng Index rallied 2.79% to 24,402.17.

FROM THE PRESS: The Chinese yuan is expected to further strengthen and exceed 6.3 against the U.S. dollar this year, despite the prospect of U.S. interest rate hikes, should China’s exports continue to perform, the 21st Century Business Herald reported citing traders. The yuan is relatively stable at 6.37 against the dollar, despite that the China-U.S. interest rate spread had narrowed to 106 bps, the lowest since 2021. Regulators should tame one-way bet on the yuan, the newspaper said citing Guan Tao, a former FX regulatory official.

China’s Q4 GDP may have slowed to about 4% from 4.9% in the previous quarter, rounding out whole-year growth to 8%, Yicai.com reported citing analysts. The average forecast for fixed-asset investment growth in 2021 is 5.29%, among which real estate investment may slow to 5.71% with new projects and home sales dropping significantly amid tight regulations on funding and land supply, the newspaper said. The robust exports helped offset sluggish domestic demand, it said. The increase in imports and exports in 2021 will be about USD1.3 trillion, equivalent to the total increase in the past 10 years, the newspaper said. China releases 2021 GDP data on Monday.

China's State Council introduced a new set of policies to boost exports, including improving export credit insurance to help small and medium exporters offset the risk of order cancellations, increase lending and accelerate export tax rebates, the Shanghai Securities News reported. Regulators will keep the yuan basically stable, enhance enterprises’ ability to hedge against forex risks, and actively promote cross-border trade settlement using yuan, the newspaper said.