MNI China Daily Summary: Wednesday, January 11

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY65 billion via 7-day reverse repos and CNY 22 billion via 14-day reverse repos Wednesday, with the rates unchanged at 2.00% and 2.15%, respectively. The operation has led to a net injection of CNY71 billion after offsetting the maturity of CNY16 billion reverse repos today, according to Wind Information. The operation aims to keep banking system liquidity reasonable and ample, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) was up to 2.0207% from the close of 1.9262% on Tuesday, Wind Information showed. The overnight repo average went up to 1.4332% from the previous 1.1313%.

YUAN: The currency weakened to 6.7775 against the dollar from 6.7772 on Tuesday. The PBOC set the dollar-yuan central parity rate higher at 6.7756, compared with 6.7611 set on Tuesday.

BONDS: The yield on the 10-year China Government Bond was last at 2.9125%, down from Tuesday's close of 2.9160%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.24% at 3,161.84, while the CSI300 index decreased 0.19% to 4,010.03. The Hang Seng Index gained 0.49% to 21,436.05.

FROM THE PRESS: The PBOC will ensure the real estate sector's smooth transition to a new development model, in plans discussed at a recent symposium, according to a notice posted on the PBOC’s social media account. The central bank will improve the balance sheet of high-quality firms and make use of special loans to guarantee housing delivery. Bond financing will be used to support private firms, and policies to improve housing demand will be implemented. The PBOC is planning to continue using structural monetary tools to support the green economy, boost innovation, and improve weak links.

Further cuts to the reserve requirement ratio (RRR) and the over-five-year Loan Prime Rate (LPR) can be expected this year, as authorities implement “accurate and forceful” monetary policy, according to experts cited by China Securities Journal. To support the real estate sector, cuts to the over-five-year LPR are likely, with Beijing conducting "targeted rate reduction" to help with the property sector recovery. On the demand side, conditions for buyers will be promoted, such as lowering down payment ratios and reducing the interest rate of mortgage loans. Stable economic growth and employment are the current primary focus of policy makers, the paper said citing experts.

Authorities must first repair household incomes and improve confidence before excess savings can be converted into consumption, according to experts cited by Securities Times. Household deposits surged by CNY17.84 trillion in 2022, from CNY7.7 trillion in 2021, and December’s growth in M2 was due to accelerated credit delivery and an increase in the scale of residents savings. The news outlet noted the divergence between the M2 and M1 growth rates remains, as M1 increased by 3.7% year-on-year, with M2 growing 11.8%, indicating weak credit demand in the period.