MNI China Press Digest Jan 11: Yuan, Economy, Investment

Highlights from Chinese press reports on Thursday:

• The yuan will gradually strengthen to 7 against the U.S. dollar throughout 2024, but the currency could weaken to 7.3 should the dollar rally again in H1 of 2024 alongside weaker-than-expected performance of the Chinese economy, said Wang Tao, head of Asia Economic Research at UBS. USD may find it hard to weaken, at least in H1, likely supported by the greater-than-expected resilience of the U.S. economy which will give the Federal Reserve reason to hold interest rates. The USD will find it difficult to depreciate if the interest-rate spread does not narrow significantly, said Wang Xinjie, chief investment strategist at Standard Chartered, noting that central banks in other developed countries also have rate-cut expectations. (Source: Yicai)
• China’s Chief Economist Index printed at 50.89 in January, unchanged from last month and above the expansionary mark of 50.0, Yicai news outlet said. Regarding data releases for December 2023, surveyed economists' average forecast for CPI was -0.34% and PPI -2.71%. Economists expect retail sales grew 8.05% y/y with fixed-asset investment up 3.08% y/y, offset by a fall in real-estate investment at -9.07% y/y. Ding Anhua, chief economist at China Merchants Bank expects the PBOC in 2024 will focus on reducing real interest rates with two RRR and two MLF rate cuts. For fiscal policy, Ding predicts the fiscal deficit to start at 3.0% but will later expand to 3.6% after the issuance of additional treasury bonds.
• Local governments are planning to reserve ultra-long-term special treasury bond projects, mainly in the areas of food, energy and industrial chain security, urbanisation, and rural revitalisation, 21st Century Business Herald reported citing anonymous sources. In October last year, China issued an additional CNY1 trillion of China Government Bonds which were managed as special treasury bonds.