MNI China Daily Summary: Friday, December 12

EXCLUSIVE: China’s steel rebar futures are set to face further downward pressure over the next two-to-three months, with prices potentially sliding below CNY3,000 per tonne as expectations for major stimulus and a sharp demand rebound fade, local analysts told MNI, noting that anticipated “anti-involution” production cuts have also fallen short of earlier hopes.

DATA: China's M2 money supply grew by 8.0% y/y in November, marking the lowest reading since May, missing market forecasts of 8.2% growth and slowing from October's 8.2% gain, data released by the People's Bank of China (PBOC) showed. New yuan loans increased for the second month by CNY390 billion in November, rising from October's CNY220 billion. Total social financing rose by CNY2.49 trillion, rising from CNY810 billion in October. 

DATA: Domestic prices of Chinese long steel products fell this week, with research firm Lange Steel's price index falling to CNY3,356 on Friday, down 1.2% from last week and 6.6% from the same period last year.

LIQUIDITY: The PBOC conducted CNY120.5 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net drain of CNY19.3 billion after offsetting maturities of CNY139.8 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.4691% from 1.4516%, Wind Information showed. The overnight repo average decreased to 1.2747% from 1.2768%. 

YUAN: The currency strengthened to 7.0554 against the dollar from the previous 7.0580. The PBOC set the dollar-yuan central parity rate lower at 7.0638, compared with 7.0686 set on Thursday. The fixing was estimated at 7.0510 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.8400%, up from the previous close of 1.8325%, according to Wind Information.

STOCKS: The Shanghai Composite Index rose 0.41% to 3,889.35, while the CSI300 index increased 0.63% to 4,580.95. The Hang Seng Index rallied 1.75% to 25,976.79.

FROM THE PRESS: Authorities will aim to prevent both excessive depreciation and appreciation of the yuan, thereby curbing pro-cyclical herd behaviour, said Guan Tao, a former senior official at the State Administration for Foreign Exchange, following the Central Economic Work Conference’s emphasis on keeping the yuan exchange rate broadly stable at a reasonable and balanced level. Ming Ming, chief economist at CITIC Securities, expects the currency to appreciate moderately if domestic policies gradually restore economic momentum. Internal and external forces could reinforce one another and potentially push the yuan below the 7.0 threshold, he added. Sun Binbin, chief economist at Caitong Securities, added that the yuan’s relatively weak performance against non-USD currencies in the first half of the year has created room for a catch-up. He expects 7.0 to act as the key threshold in the first half of 2026, with a possible “break of 7” in the second half. (Yicai)

China must increase the social security provision for its 200 million flexible employees, according to Zhang Chenggang, director at the China New Employment Forms Research Center, noting that the move would strengthen protection against income volatility, health risks and career transitions. His comments follow the Central Economic Work Conference, which called for stabilising employment for key groups such as college graduates and migrant workers. Experts interviewed by Yicai said that new forms of employment have fundamentally reshaped labour relations, making traditional frameworks inadequate. They stressed that policymakers must adjust and revise social security policies and labour laws, actively lower participation thresholds, offer insurance subsidies and expand coverage so that as many workers as possible can participate in the social insurance system.

Next year, supply-side reform of the property market will focus more on controlling new supply, reducing inventory and improving quality, while integrating efforts to revitalise existing housing stock, according to industry insiders interviewed by Yicai. At the same time, experts said that high-quality urban renewal will play a bigger role in stabilising the housing market. Li Yujia, chief researcher at the Guangdong Housing Policy Research Center, emphasised that the housing provident fund system serves as the sector’s core inclusive-finance tool, yet many cities still underutilise individual provident fund loans. To fix this, policymakers must accelerate deployment of funds, improve conditions for cross-regional lending and expand support for new housing models that combine renting and buying, Li added.