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EXCLUSIVE: Sales restrictions and purchase limits designed to regulate real
estate in smaller Chinese cities may be slightly relaxed next year as the
government seeks to avoid a slide in growth, but a broader easing of the
country's bubble-prone property markets is unlikely unless housing prices slide
or developers face a significant risk of defaulting on bonds, advisors at
government-backed think tanks told MNI. The omission of a key phrase from the
communique issued by the annual Central Economic Work Conference, a major policy
event which sets the economic agenda for 2020, indicates that "marginal easing
of the property sector can be expected," said Cai Zhen, director of the Real
Estate Finance Research Center at the National Institution for Finance &
Development. "More priority will be given to stabilising growth than preventing
risks next year," Cai said, after the communique left out the phrase "not to use
property as a short-term means of stimulating the economy."
TOP NEWS: The People's Bank of China (PBOC) lowered the 14-day reverse repo
rate to 2.65% from 2.70%, according to a statement on its website. This was the
first cut to the 14-day interbank rate since a 30-bps cut on Feb 2, 2016,
according to data from Wind Information.
LIQUIDITY: The PBOC injected CNY50 billion 7-day reverse repos and CNY150
billion 14-day reverse repos today, adding net CNY200 billion in liquidity as no
reverse repos mature, according to Wind Information. The PBOC will pay close
attention to the market liquidity situation, conduct flexible open market
operations (OMOs), and maintain stable liquidity at the end of the year, the
central bank said on its website.
LIQUIDITY: Liquidity conditions remained loose in December with fewer
maturing repos and a light tax payment month, the latest MNI China Liquidity
Survey showed. MNI's Liquidity Conditions Index stood at 15.4 in December,
little changed from 12.5 in November, with 76.9% of the respondents reporting an
ample supply of cash. It was the lowest end-year reading for the Index since
2014. The higher the index reading, the tighter liquidity appears to market
RATES: The seven-day weighted average interbank repo rate for depository
institutions (DR007) declined to 2.5472% from Tuesday's close 2.5672%, Wind
Information showed. The overnight repo average fell to 2.4672% from 2.5019%
YUAN: The yuan strengthened to 6.9996 against the dollar from Tuesday's
close 7.0024. PBOC set the dollar-yuan central parity rate below 7 for the third
day at 6.9969, following 6.9971 yesterday.
BONDS: The yield on 10-year China Government Bonds was last at 3.2325%, up
from Tuesday's close of 3.2225%, according to Wind Information.
STOCKS: The Shanghai Composite Index edged down 0.18% to 3,017.04, dampened
by the lost of medicine and pork shares. Hong Kong's Hang Seng Index increased
0.15% to 27,884.21.
FROM THE PRESS: China should establish a financial risk warning system with
different levels of intervention, the Securities Times reported citing Ma Jun, a
member of the PBOC Monetary Policy Commission. Local governments should take
responsibility for managing possible risks triggered by their implicit debts.
Insolvent local government financing vehicles (LGFVs) should be encouraged to
integrate with other financial vehicles with liquid assets, the newspaper cited
Ma as saying.
There are signs of potential defaults from government infrastructure-backed
special purpose bonds as outstanding debts exceed revenues, the 21st Century
Business Herald reported citing Wang Kebing, an inspector from the Budget
Department at the Ministry of Finance. Outstanding debt from the bonds was
CNY7.39 trillion against local government fiscal revenue of CNY7.14 trillion in
2018. With the issuance of special purpose bond increasing, local government
should also broaden its sources of income from infrastructure projects instead
of relying on selling land, Wang said according to the newspaper.
China's CPI this year is expected to be within the target range of around
3% as hog production gradually recovers, the Securities Daily reported citing
the National Development and Reform Commission. The number of live pigs in
November grew 2% m/m for the first time since November 2018. CPI may rise higher
than 4.5% in Nov early next year, as the Chinese New Year in late January boosts
--MNI Beijing Bureau; +86 (10) 8532-5998; email: firstname.lastname@example.org
--MNI Beijing Bureau; +86 10 8532 5998; email: email@example.com