MNI China Daily Summary: Wednesday, January 22
EXCLUSIVE: Chinese short-term interbank money markets saw significant liquidity shortages around mid-January, as the People’s Bank of China limited seasonal injections and suspended bond purchases in order to support the yuan and bond yields, MNI’s China Money Market Index indicated.
POLICY: China will guide more insurance funds to invest in equities and promote the scale of equity funds in a bid to boost the market, according to a plan issued on the website of China Securities Regulatory Commission (CSRC).
POLICY: China is willing to keep talking with the U.S., attempt to broach any differences and boost mutually beneficial cooperation, said Mao Ning, spokeswoman of the Ministry of Foreign Affairs when pressed whether the two countries are communicating on tariff issues.
POLICY:China’s iron ore imports will maintain positive growth in 2025, with the property sector remaining a drag on demand but offset by downstream manufacturing strength, Mysteel analysts said at a seminar.
LIQUIDITY: The PBOC conducted CNY1.1575 trillion via 14-day reverse repos, with the rate unchanged at 1.65%. The operation led to a net injection of CNY198 billion after offsetting the maturity of CNY959.5 billion today, according to Wind Information.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.8721% from 2.0324%, Wind Information showed. The overnight repo average increased to 1.7999% from 1.7989%.
YUAN: The currency weakened to 7.2800 to the dollar from 7.2798 on Tuesday. The PBOC set the dollar-yuan central parity rate lower at 7.1696, compared with 7.1703 set on Tuesday. The fixing was estimated at 7.2659 by Bloomberg survey today.
BONDS: The yield on 10-year China Government Bonds was last at 1.6475%, up from Tuesday's close of 1.6450%, according to Wind Information.
STOCKS: The Shanghai Composite Index decreased 0.89% to 3,213.62, while the CSI300 index fell 0.93% to 3,797.02. The Hang Seng Index declined 1.63% at 19,778.77.
FROM THE PRESS: China could offer interest or yield subsidies to speed up local authorities' acquisition of unsold homes for affordable housing and destocking, 21st Century Business Herald reported, citing Zhu Haibin, chief China economist at J.P. Morgan Chase. The Ministry of Finance could support CNY1 trillion of housing acquisitions by releasing CNY20 billion of funds through subsidising interest rates or yields by about two percentage points, said Zhu. A yield of 3.5-4% would make acquisitions attractive, compared to China’s current rental yield of about 2%, Zhu added.
China does not seek a trade surplus and wants to promote balanced trade by importing more quality products and services, Ding Xuexiang, vice premier at the State Council, told delegates at the World Economic Forum in Davos. The government will make continuous efforts to improve conditions for multinational companies, such as IP protection, cross-border data flow and access to factors of production. Ding said officials would work with foreign firms to access government procurement contracts, acknowledging some invisible barriers remain despite receiving equal treatment under Chinese law. (Source: China Ministry of Foreign Affairs)
U.S. President Donald Trump will likely prioritise domestic affairs at the start of his second term despite a previous focus on China, wrote Xiao Yu, a researcher from the Chinese Academy of Social Sciences. However, China should be aware Trump could start a global tariff war should a 25% tariff on Canada and Mexico be imposed, said Xiao. The Federal Reserve will likely continue gradually cutting interest rates as U.S. inflation will ease if Trump’s strategy to control energy prices by increasing crude oil output works, Xiao predicted. (Source: 21st Century Business Herald)