MNI China Press Digest Jan 17: LPR, Yuan Bonds, Premier Li

Highlights from Chinese press reports on Wednesday:

• China’s benchmark Loan Prime Rate may hold next Monday, as the People’s Bank of China kept the anchor rate of the Medium-term Lending Facility unchanged this week, Securities Daily reported citing analysts. Some banks are under great pressure on their net interest margins, with the 1.73% average net interest margin of commercial banks by end-Q3 lower than the “warning line” of 1.8% proposed by the Pricing Self-Regulatory Mechanism for Market Interest Rates. Despite major state-owned banks lowering their deposit rates last month, some small and medium-sized banks raised the rates to attract depositors instead. Lowering lending rates under this circumstance may be harmful to resolving the risks of smaller financial institutions, said Bian Quanshui, chief macro analyst at Western Securities. One-year LPR sits at 3.45%, with the five-year rate at 4.2%.
• Foreign investors will likely continue to buy yuan bonds in the coming months, supported by the steady recovery of the Chinese economy and eased depreciation pressure of the yuan, Securities Times reported. Investors overseas have continued to increase net domestic bond holdings, with December recording a USD24.5 billion rise, a two-year high. Foreign investors increased their net holdings of yuan bonds by nearly CNY300 billion throughout 2023. They continued to hold China Government Bonds, bought policy bank deals and diversified their portfolio by holding interbank certificates of deposit.
• Chinese Premier Li Qiang said on Tuesday the economy was open for business and highlighted its potential for foreign investment, while calling for strengthened global cooperation. Speaking at the 54th annual meeting of the World Economic Forum in Davos, he noted China had a large market with demand rapidly rising amid new urbanisation and green transformation, which will provide a broad space for world trade and investment growth. The world must increase macroeconomic policy coordination, safeguard multilateral trading and work together to create a non-discriminatory environment for science and technology development. (Source: Xinhua News Agency)