MNI China Daily Summary: Wednesday, Dec 4
POLICY: China will need to boost consumption via structural reforms to offset the possible impact of U.S. tariff increases, said Liu Shijin, former vice president of the Development Research Center of the State Council in Beijing.
LIQUIDITY: The People's Bank of China (PBOC) conducted CNY41.3 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY227 billion after offsetting the maturity of CNY268.3 billion today, according to Wind Information.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.6096% from 1.6057%, Wind Information showed. The overnight repo average increased to 1.3888% from 1.3363%.
YUAN: The currency strengthened to 7.2688 to the dollar from 7.2791 on Tuesday. The PBOC set the dollar-yuan central parity rate lower at 7.1934, compared with 7.1996 set on Tuesday. The fixing was estimated at 7.2836 by Bloomberg survey today.
BONDS: The yield on 10-year China Government Bonds was last at 1.8925%, down from Tuesday's close of 1.9150, according to Wind Information.
STOCKS: The Shanghai Composite Index decreased 0.42% to 3,364.65, while the CSI300 index fell 0.54% to 3,930.56. The Hang Seng Index declined 0.02% at 19,742.46.
FROM THE PRESS: The People’s Bank of China will likely cut the reserve requirement ratio in Q3 to support the accelerated issuance of government bonds since August and help ease increased liquidity pressure in mid-September as the medium-term lending facility operation has been delayed to around the 25th of each month from the 15th, China Securities Journal reported citing Li Chao, chief economist at Zheshang Securities. The expected Fed rate cut would open room for the PBOC to ease, as there is an urgent need to increase countercyclical adjustments in real estate, the newspaper said citing Yi Huan, chief macroeconomist at Huatai Securities.
Shanghai's city government will arrange more than CNY4 billion in funds from its fiscal budget and ultra-long-term special treasury bonds for the trade-in of automobiles and green home appliances to revive the consumer market, Yicai.com reported. With the scale of consumer subsidies hitting a record high, Shanghai increased subsidies of electric and fuel vehicle trade-ins to CNY15,000 and CNY12,000 for each consumer, said Yicai.
Canada’s decision to implement tariffs against Chinese exports will not meaningfully impact the nation's export performance due to the small volumes involved, according to Liang Ming, director at the Ministry of Commerce Research Institute. However, Canada’s actions could damage China by influencing other countries to follow suit, which would adversely impact global trade, Liang noted. China can legally take countermeasures against Canada given they have clearly adopted discriminatory prohibitions, he said.