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MNI China Daily Summary: Wednesday, January 4
LIQUIDITY: The People's Bank of China (PBOC) on Wednesday conducted CNY3 billion via 7-day reverse repos with the rates unchanged at 2.00%. The operation led to a net drain of CNY327 billion after offsetting the maturity of CNY330 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) decreased to 1.4552% from the close of 1.6448% on Tuesday, Wind Information showed. The overnight repo average decreased to 0.9203% from the previous 1.3946%.
YUAN: The currency strengthened to 6.8825 against the dollar from 6.9475 on Tuesday. The PBOC set the dollar-yuan central parity rate lower at 6.9131, compared with 6.9475 set on Tuesday.
BONDS: The yield on the 10-year China Government Bond was last at 2.8500%, unchanged from Tuesday's close of 2.8500%, according to Wind Information.
STOCKS: The Shanghai Composite Index edged up 0.22% at 3,123.52, while the CSI300 index increased 0.13% to 3,892.95. The Hang Seng Index gained 3.22% to 20,793.11.
FROM THE PRESS: The government will maintain the appropriate level of expenditure to improve people's livelihood in 2023, despite the fiscal gap remaining "prominent", according to Finance Minister Liu Kun. China will appropriately expand the scope of special bonds to drive investment, and to promote the overall operation of the economy. The Finance Ministry will focus on standardising the management of local government financing platforms, and will improve the use of preferential tax and subsidy policies to both private and state firms. Liu’s comments were reported in an interview with Chinese state media outlet Xinhua.
Several tier two cities in China are targeting GDP growth rates of between 5.5% to 7% in 2023, as local authorities remain optimistic about the economic recovery, according to the 21st Century Herald. Citing experts, the paper said the optimisation of epidemic controls, together with more growth oriented policies and lower base effects from 2022 will have a significant positive impact on economic recovery. Jinan, Changsha, Qingdao and Hefei are targeting growth in fixed asset investment of between 6% and 10%, and growth in total retail sales of between 5% and 9%. With the slowing of the global economy weighing on exports, the economic recovery will be driven by investment and consumption in 2023, the paper said.
The yuan’s recent strength can continue as China’s economy and yuan assets become investment safe havens amidst a global slowdown in 2023, according to the Securities Daily. The yuan recently reclaimed the 6.9 mark against the dollar as end-of-year liquidity requirements, an extension of trading hours, increased weighting in the International Monetary Fund's Special Drawing Rights, and Covid optimisation measures increased market support for the yuan. The impact of the strong U.S. dollar on the yuan will weaken in 2023, and China's economic recovery amid a global downturn will boost demand for yuan assets and capital inflows.
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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.