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POLICY: China's Ministry of Finance (MOF) will enhance the role of China
Government Bonds(CGBs) as a main tool for central bank open market operations,
expanding their use in the transmission of monetary policy, Guo Fangming, deputy
director of the Treasury Department under the MOF told a economic forum today.
The move could improve coordination between CGB issuance and money supply, a
bond analyst told MNI, noting the People's Bank of China(PBOC) could inject
liquidity via direct purchases of CGBs from the MOF, rather than the current
operations that see the PBOC lending to financial institution using outstanding
CGBs as collateral.
TRADE WAR: China and U.S. teams of negotiators are still working to carry
out the consensus by Presidents Xi Jinping and Donald Trump agreeing to resolve
the two sides' trade frictions, Ren Hongbin, assistant to the Minister of
Commerce, told reporters in Beijing today. Ren declined to comment directly on
the progress of the trade talks.
DATA: The average price of new homes in 70 major cities, excluding
subsidized units, increased 10.6% y/y in December, the fastest gain in 19
months. It compared with a 10.3% gain in November, according to MNI
calculations. On m/m monthly basis, the average price gained 0.8%, cooling from
October's 1.0% growth. Gains in housing prices in the top 15 cities followed the
trend -- accelerating on year but decelerating on month. The gain of 5.7% y/y
marked the sharpest since August 2017 while the growth of 0.7% m/m eased from
0.8% in November.
LIQUIDITY: The PBOC today injected CNY350 billion via 7-day reverse repos,
and CNY220 billion through 28-day reverse repos, adding liquidity for a third
day. It resulted in a net injection of CNY560 billion given the maturity of
CNY10 billion reverse repos today, according to Wind Information. The PBOC said
it is currently the peak of tax season and total liquidity in the banking system
is falling rapidly.
RATE: The 7-day weighted average interbank repo average rate for depository
institutions (DR007) decreased to 2.6137% from Tuesday's close of 2.6463%, Wind
Information showed. The overnight repo average increased to 2.2832% from
YUAN: The yuan depreciated to 6.7550 against the U.S. dollar from Tuesday's
close of 6.7544. The PBOC set the dollar-yuan central parity rate weaker at
6.7615, compared with 6.7542 on Tuesday.
BONDS: The yield on the benchmark 10-year China Government Bond was last at
3.0900%, down from the closing of 3.1400% on Tuesday, according to Wind
STOCKS: The benchmark Shanghai Composite Index closed at 2,570.42, little
changed from Tuesday. Hong Kong's Hang Seng Index increased 0.27% to 26,902.10.
FROM THE PRESS: Although the yuan faced depreciation pressure in 2018, the
market has adapted to the fluctuations and there were no panics in the forex
market, China Business News reported late Tuesday, citing Guan Tao, former
director of the Balance of Payments Department at the State Administration of
Foreign Exchange. This is positive progress that will be conducive to the
liberalization of the foreign exchange market. "To liberalize the market, we
must let the exchange rate leverage play an important part, and allow investors
to buy at a low price and sell at a high price", Guan said, CBN reported.
Local governments are strictly banned from using reserve land as a
collateral for financing, referred to as illegal financing, and are forbidden to
move reserve land to local state-owned enterprises(SOEs) as an asset, a
government document has laid out, the Economic Information Daily reported,
citing the Ministry of Natural Resources. The confirmed regulations say all
local governments may no longer take land reserve loans from banks, and land
reserve agencies shall not provide guarantees for any debt, the newspaper said
citing the Ministry.
The State-owned Assets Supervision and Administration Commission(SASAC)
will tighten control over the financial business and debt risk of state-owned
key enterprises this year, China Securities Journal said. Key SOEs' financial
business will be limited to adding new investment projects, and those who launch
financial derivative business must prohibit any speculative activity, the
newspaper said, citing SASAC.
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