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POLICY: China’s domestic demand will be further expanded and play a greater role in driving the economic growth next year, said Fu Linghui, spokesman of the National Bureau of Statistics at a briefing after releasing November’s slower-than-expected spending and investment data. Consumption can be further boosted if keeping the epidemic under control, supported by stable income and employment as well as the need for better consumer goods and services by the over 400 million middle-income group, said Fu.
DATA: Industrial production rebounded slightly for the second month to 3.8% y/y in November from October's 3.5%, in line with the prediction. Retail sales rose 3.9% y/y in November, slowing from October's 4.9%, underperforming the 4.7% forecast. Fixed-asset investment rose 5.2% y/y in January-November period to the lowest point within this year, after 6.1% in January-October, also weaker than the 5.4% forecast.
LIQUIDITY: The People's Bank of China (PBOC) injected CNY500 billion via a 1-year medium-term lending facility and CNY10 billion via 7-day reverse repos with the rates unchanged at 2.95% and 2.2%, respectively. The operation has led to a net drain of CNY450 billion after offsetting the maturity of CNY950 billion MLF and CNY10 billion repos today, according to Wind Information. The operation aims to keep liquidity reasonable and ample, and the cut of the reserved requirement ratio by 0.5% for financial institutions effective today has released around CNY1.2 trillion long-term funds into the market, the PBOC said on its website.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 2.1904% from the close of 2.2071% on Thursday, Wind Information showed. The overnight repo average decreased to 2.1242% from the previous 2.1716%.
YUAN: The currency weakened to 6.3652 against the dollar from 6.3634 on Tuesday. The PBOC set the dollar-yuan central parity rate higher at 6.3716, compared with 6.3675 set on Tuesday.
BONDS: The yield on the 10-year China Government Bond was last at 2.8800%, up from Tuesday's close of 2.8710%, according to Wind Information.
STOCKS: The Shanghai Composite Index edged down 0.38% at 3,647.63, while the CSI300 index fell 0.87% to 5,005.90. Hang Seng Index lost 0.91% to 23,420.76.
FROM THE PRESS: The PBOC will keep liquidity reasonable and ample next year while making monetary policy more “forward-looking and targeted” through both short and long-term measures, so as to help promote stable growth demanded by last week’s top leadership meeting on the economy, the CEWC, according to a statement on its website. The central bank will also strengthen the flexibility of the yuan exchange rate and promote lower costs of capital raising through further reforming interbank market rates, the statement read.
China’s fiscal policies may play a bigger role in stabilizing growth next year, while monetary policies are likely to lean toward limited loosening to coordinate with fiscal stimulus, Yicai.com reported. China may further lower banks’ reserve requirement ratios and moderately lower policy rate if necessary, it said. Monetary policies will also need to be designed to boost financial support to small businesses, which face weak demand, insufficient cash, and impact from government policies, the news site said. China is likely to maintain tight controls over real estate while taking measures to ensure the sector’s “soft landing,” it said.
China is expected to stimulate growth by promoting the sales of green home appliances and new energy vehicles and increasing investment in high-tech and infrastructure that support decarbonization, Yicai.com reported citing analysts. Measures may include issuing vouchers and encouraging car sales in rural areas, the newspaper said. Boosting investment will be the key to preventing a slowdown, with infrastructure mainly focusing on supporting digital and green transform, as well as technology upgrade to ensure a stable supply chain, the newspaper said citing analysts.
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