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MNI China Daily Summary: Wednesday, October 30

LIQUIDITY: About two-thirds of Chinese money market traders expect the People’s Bank of China (PBOC) to cut banks’ reserve requirement ratios in the fourth quarter, as authorities strive to meet the target for GDP growth of about 5%, results from MNI’s China Money Market Index showed. 

LIQUIDITY: The PBOC conducted CNY431.0 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY361.7 billion after offsetting the maturity of CNY792.7 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.7211% from 1.8064%, Wind Information showed. The overnight repo average decreased to 1.3806% from 1.4484%.

YUAN: The currency strengthened to 7.1222 to the dollar from the previous 7.1417. The PBOC set the dollar-yuan central parity rate higher at 7.1390 on Wednesday, compared with 7.1283 set on Tuesday. The fixing was estimated at 7.1407 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.1340%, down from the previous close of 2.1400%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.61% to 3,266.24, while the CSI300 index fell 0.90% to 3,889.45. The Hang Seng Index lost 1.55% at 20,380.64.

FROM THE PRESS: The PBOC should address low domestic demand by accelerating the downward adjustment of policy interest rates to lower real interest rates significantly, said Zhang Bin, deputy director at the Institute of World Economics and Politics, Chinese Academy of Social Sciences. The government’s broad spending growth needs to exceed the nominal GDP target to provide countercyclical support, Zhang noted. To stabilise the real-estate sector, developers have to improve their cash flow and some firms need to restructure. (Source: 21st Century Business Herald)

Authorities should take the current opportunity to stabilise market expectations and raise confidence by increasing the positive tone of fiscal and monetary policy, according to Huang Hanquan, President at the National Development and Reform Commission's Macroeconomic Research Institute. Speaking at a recent seminar, Huang said reforms were needed in key areas such as the fiscal and taxation system, income distribution and social security. Huang noted existing and incremental policies will alleviate insufficient domestic demand to a certain extent.

Officials should earnestly implement actions over the next two months and strive to achieve the nation’s annual economic, and social development goals, President Xi Jinping has told provincial and ministerial leaders. Speaking at a CPC seminar, Xi said regions and departments should implement existing and incremental policies and adhere to reform and opening up including connecting with international economic and trade rules.

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