MNI China Daily Summary: Wednesday, December 11

EXCLUSIVE: The People’s Bank of China (PBOC) will increase its treasury purchases in 2025 as it aims to coordinate more closely with Beijing’s expansionary fiscal policy and boost credit demand, former officials told MNI, noting fresh stimulus will likely see China’s deficit-to-GDP ratio climb 1 percentage point to 4% next year.

POLICY: Chinese rail passenger volumes reached 4.01 billion between January and November this year, up 12.6% y/y and the highest on record, according to the National Railway Administration.

LIQUIDITY: The PBOC conducted CNY78.6 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net injection of CNY37.3 billion after offsetting the maturity of CNY41.3 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.7552% from 1.8165%, Wind Information showed. The overnight repo average increased to 1.5377% from 1.4828%.

YUAN: The currency weakened to 7.2590 to the dollar from the previous 7.2493. The PBOC set the dollar-yuan central parity rate lower at 7.1843, compared with 7.1896 set on Tuesday. The fixing was estimated at 7.2561 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.8450%, up from the previous close of 1.8400%, according to Wind Information.

STOCKS: The Shanghai Composite Index rose 0.29% to 3,432.49, while the CSI300 index edged down 0.17% to 3,988.83. The Hang Seng Index decreased 0.77% at 20,155.05.

FROM THE PRESS: Beijing is likely to raise its deficit-to-GDP ratio to around 4% next year, after the Politburo meeting called for implementing a more proactive fiscal policy and strengthening extraordinary countercyclical adjustment this week, Yicai.com reported, citing analysts. Luo Zhiheng, chief economist at Yuekai Securities said a 4% deficit rate sends a strong signal to stabilise expectations, which directly boosts the capital market and allows the government to increase spending and alleviate local fiscal pressure quicker than issuing special treasury bonds.

China’s export growth slowed sharply in November to 6.7% y/y, due to base effects and diminished short-term factors behind October’s 12.7% y/y increase, according to Feng Lin, executive director of research at Orient Jincheng. November in-bound shipments fell 3.9% y/y, widening from October’s 2.3% decline, as domestic demand remained weak and firms' reluctance to increase inventory, said Zhou Maohua, researcher at Everbright Bank. However, the domestic economy continued to improve given import growth of electronic components, electromechanical products, minerals and energy was positive, Zhou noted.

China’s SME Development Index reached 89.2 for November, up 0.2 points from October and marking the second month of consecutive increase, the China Association of Small and Medium Enterprises (CASME) said. SME confidence continued to improve and market demand has rebounded, however policymakers must continue expanding demand and revitalizing consumption to help enterprises grow and stabilise orders, Ma Bin, executive vice-president at CASME noted.