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Free AccessMNI China Daily Summary: Wednesday, December 20
TOPS NEWS: China's top leaders will wrap up by Wednesday evening their
annual closed-door meeting that sets the economic agenda for next year. Taking
place just after the 19th Chinese Communist Party Congress, the meeting is also
expected to set out how China's new leadership will guide the country in
realizing its ambition to achieve global economic supremacy. The Central
Economic Working Conference (CEWC) will further expound on the spirit of
President Xi Jinping's report to the October Congress rather than laying out new
policies. The CEWC, which began on Monday, was also held just after the meeting
of the Central Committee Politburo on Dec. 8, itself a precursor of what to
expect out of the CEWC meeting.
TOP NEWS: The People's Bank of China is likely to make an overall cut to
banks' reserve requirement ratio in the second half of 2018 as the economy slows
and the government's deleveraging campaign takes firmer hold, Zhao Yang, China
chief economist at Nomura, the Japanese global investment bank, told Market News
in an interview. Zhao, previously a senior official with the Hong Kong Monetary
Authority, also told MNI that the risk for corporate bond defaults would
increase next year and that a slowdown in China's export trade would act as a
drag on the economy.
DATA: Chinese bankers are more confident about the country's economic
outlook, according to the results of a quarterly survey of bankers at about
3,200 bank branches by the People's Bank of China published on Tuesday. An index
that measures bankers' confidence in macroeconomic developments rose 3.8
percentage points from the third quarter to 79.1% in the fourth quarter, the
central bank said in a statement on its website. Any index reading above 50
suggests respondents are optimistic. As for the "economic temperature" of the
country, 79.1% of the bankers surveyed indicated the current economy was at a
"normal" temperature, 4.2 percentage points higher than in the third quarter,
and 19.2% of bankers said they thought the economy was "cold," 4.3 percentage
points lower than in the previous quarter.
LIQUIDITY: The People's Bank of China announced on its website Wednesday
morning that it had injected CNY40 billion in liquidity via seven-day reverse
repos, CNY30 billion via 14-day reverse repos and CNY10 billion via 28-day
reverse repos, with rates unchanged at 2.50%, 2.65% and 2.80%, respectively. The
PBOC did not give further explanations about its operations this morning. This
resulted in a net injection of CNY10 billion for the day, as a total of CNY70
billion in reverse repos matured on Wednesday.
RATES: Money market rates were lower on Wednesday after the PBOC injected a
net of CNY10 billion via open-market operations. The seven-day repo average was
last at 2.9041%, up from Tuesday's average of 2.9024%. The overnight repo
average was at 2.7092% compared with Tuesday's 2.7247%.
YUAN: The yuan strengthened against the U.S. dollar on Wednesday after the
People's Bank of China set a stronger daily fixing. The yuan was last at 6.5918
against the U.S. unit, rising 0.25% compared with the official closing price of
6.6075 on Tuesday. The People's Bank of China set the yuan central parity rate
against the U.S. dollar at 6.6066 on Wednesday, stronger than Tuesday's 6.6098.
The PBOC has set the fixing stronger for two straight trading days.
BONDS: The yield on benchmark 10-year China government bonds was last at
3.9000%, unchanged from the previous close, according to Wind, a financial data
provider.
STOCKS: Stocks were down, leading lower by the telecommunication sector.
The benchmark Shanghai Composite Index close down 0.27% at 3,287.61. Hong Kong's
Hang Seng Index was 0.15% lower at 29,208.33.
FROM THE PRESS: The National Development and Reform Commission has launched
a nationwide carbon trading system to guide companies in meeting China's goal of
achieving a greener and higher-quality economy, the commission announced Tuesday
on its website and blog. The NDRC emphasized the importance of using the trading
system to control carbon dioxide emissions and said the program would begin with
the power generation sector. The 21st Century Business Herald reported that
China's system could eventually grow larger than any other carbon trading market
in the world.
China needs to expand the scope of taxation for local governments in order
to establish a stable and sustainable taxation system, Finance Minister Xiao Jie
wrote in an article Wednesday in the official People's Daily. In his analysis of
how China should reform its fiscal system under the guidance of the 19th
Communist Party Congress, Xiao said that the country would continue to make
changes to its taxation process for property, personal income and local
governments, and that steady progress had been made on creating related laws. He
stressed that the rights and responsibilities of the central government and
local governments in their fiscal relationship should be clear and balanced.
(People's Daily)
Several Chinese banks have raised their interest rates to attract more
deposits at the end of the year, including two that have lifted rates to more
than 5%, the 21st Century Business Herald reported Wednesday. One reason for the
increases is that money market interest rates have gone up. Also, banks are
competing more with one another, and they need to store more cash for the
customary surge in lending at the beginning of the new year, the report said.
Another factor is that banks are losing deposits to upstart financial technology
companies: the growth rate for deposits at banks has dropped to an annualized 2%
this year, on average, from 7.8% in 2016. Bank executives at a forum in Suzhou
said they now pay more attention to deposits because of the government's
deleveraging campaign. (21st Century Business Herald)
A total of 15 bonds, worth nearly CNY15 billion, issued by Chinese
companies have defaulted since the start of November, the 21st Century Business
Herald reported Wednesday. The increasing frequency of bond defaults has led to
widespread delays or cancellations of issuance, affecting 760 bonds worth more
than CNY700 billion, the report said. One of the most recent cases was that of
China City Construction Corporation Limited, which announced Monday that its
tight financial situation had led it to default on CNY1 billion in bonds.
China's supply-side structural overhauls and its environmental protection
campaign, which can weigh on industrial production, have eaten into companies'
profits and made it difficult for them to manage their bond payments, analysts
said. Another reason given by the analysts is that bond market adjustments and
new refinancing rules in the stock market have made it hard for companies to
roll over their debt. (21st Century Business Herald)
China Construction Bank's Guangdong branch director, Liu Jun, said
Wednesday at a forum that the bank would start a new business on Jan. 8 called
"rental housing deposits" -- homeowners selling rental rights for their
properties to the bank, which in turn will pay specified periods of rent back to
the homeowners, 21st Century Business Herald reported Wednesday. The banks will
then presumably try to rent out the properties -- through property rental
agencies -- at a higher price than what they paid the homeowners. The move comes
amid the Chinese government's effort to improve the residential rental market as
it aims for a long-term effective property system. (21st Century Business
Herald)
--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com
--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com
[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.