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.
MNI (BEIJING) - Local interbank trader’s see China's economic performance at a 12-month low in August, as weak July economic data pushed the People's Bank of China to maintain ample liquidity to support growth, the MNI China Liquidity survey showed.
The MNI China Economy Condition Index read 41.9 in August, down from 47.7 previously, the fourth consecutive monthly decline and the lowest reading since August 2023.
Trader’s outlook for economic growth in the next 6 months saw 18.6% of participants expecting an improvement and14.0% seeing a decline, a special question in this month's survey showed. The near two-thirds balance of replies saw no change. “The economy faces downward pressure from weak consumption and investment,” an Anhui based trader noted.
China’s industrial production rose 5.1% y/y in July, lower than the 5.3% y/y growth in June. Retail sales went up 2.7% y/y, rebounding from June’s 2.0%. Fixed-asset investment grew 3.6% in Jan-Jul period, compared with the previous 3.9% increase.
Government plans to boost consumption by increasing urbanisation face difficulty from tight local government fiscal resources, advisors told MNI (See MNI: China’s Urbanisation Target Needs Broader Reforms). China's crude oil refinery processing and crude imports are set to fall during 2024 amid a weak economy and the switch to electric vehicles, a leading Chinese oil expert told MNI (See MNI INTERVIEW: China Oil Imports To Fall Despite H2 Boost).
EASING LIKELY
China’s interbank market liquidity condition remained ample in August, with the MNI China Liquidity Condition Index standing at 32.6, up from July’s 31.4, with 51.2% of traders saying liquidity increased, versus 53.5% last month. The higher the index reading, the tighter liquidity.
The PBOC injected liquidity to ease tension from tax payments and high bond issuance, a Beijing trader said, but noted funds were not drawn back quickly enough to avoid rates rising, therefore signalling the banks' intention to keep liquidity ample.
MNI asked traders if they expected the PBOC's monetary policy approach to become looser, tighter, or stay the same in the coming six months, with 65.1% of participants expecting a looser stance and 72.1% predicting either a RRR, or policy rate cut.
“The policy rate (7-day repo rate) is likely to be cut in Q4 by 10-20 bps to support the economy, reduce costs and stimulate demand,” a Shanxi based trader said.
RATES
The People's Bank of China is closely monitoring short-term inflows into the bond market as it continues to push back against what it sees as a risky decline in long-term yields. (See MNI Policy: PBOC Watching Bond Rally, Starts Stress Tests)
However, The MNI China 10-year CGB Yield Index read 31.4, down from 34.9 previously, with 46.5% of traders predicting the yield will slide in future three months versus 9.3% that saw an increase.
The MNI China 7-Day Repo Rate Index rose to 58.1 in August from previous 46.5, with 48.8% of participants expecting an upward curve and another 32.6% predicting a slide due to ample liquidity.
Click below for the full report:
MNI China Liquidity Index Aug 2024.pdf
For full database history and full report on the MNI China Liquidity Index™, please contact:sales@marketnews.com
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.