MNI China Daily Summary: Friday, December 5

EXCLUSIVE: China’s policymakers will reaffirm an expansionary fiscal and monetary policy stance at an upcoming annual key meeting to underpin a potential 5% economic growth target for 2026, policy advisors told MNI, adding that the deficit-to-GDP ratio is likely to remain around 4% while treasury and local-government bond issuance is set to increase.

EXCLUSIVE: Authorities are likely to focus any near-term property market stabilisation efforts on targeted, city-level measures, advisors and analysts told MNI, with central officials expected to hold policy steady at the upcoming Central Economic Work Conference (CEWC) and adopt a wait-and-see approach before considering broader nationwide steps such as mortgage subsidies.

POLICY: Authorities in Beijing are reviewing proposals to develop the country’s consumer goods trade-in and equipment upgrade scheme for 2026, Wang Shancheng, director at the National Development and Reform Commission, told reporters.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY139.8 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net drain of CNY161.5 billion after offsetting maturities of CNY301.3 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.4380% from 1.4376%, Wind Information showed. The overnight repo average increased to 1.3001% from 1.2997%. 

YUAN: The currency weakened to 7.0706 against the dollar from the previous 7.0690. The PBOC set the dollar-yuan central parity rate higher at 7.0749, compared with 7.0733 set on Thursday. The fixing was estimated at 7.0740 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.8350%, down from the previous close of 1.8400%, according to Wind Information.

STOCKS: The Shanghai Composite Index rose 0.70% to 3,902.81, while the CSI300 index increased 0.84% to 4,584.54. The Hang Seng Index edged up 0.58% to 26,085.08.

FROM THE PRESS: The Chinese yuan is likely to “break 7” against the U.S. dollar in the short term, chief economists told Securities Daily, though they cautioned that the currency’s ability to remain below the 7.0 threshold is still uncertain. The remarks follow a 21-basis-point increase in the renminbi’s central parity rate to 7.0733, the highest level since October last year, while the onshore yuan closed at 7.069 on Thursday, down 29 bp from the previous session. Experts attributed the yuan’s recent appreciation to a confluence of supportive factors, noting that the fourth quarter was traditionally the peak season for corporate foreign-exchange settlement. Strong export performance, with U.S. dollar-denominated exports rising 5.3% year-on-year in the first 10 months, has further concentrated settlement demand. Additionally, some companies may opt to settle foreign exchange earlier to lock in renminbi revenues ahead of potential U.S. dollar volatility and Federal Reserve rate cut uncertainty.

China’s November CPI is expected to rise 0.9% year-on-year, faster than the 0.2% in October, according to Wen Bin, chief economist at Minsheng Bank. He noted that food prices have strengthened, with the agricultural wholesale price 200 index rising 4.4% month-on-month. Colder temperatures reduced the supply of vegetables and fruits and increased transportation difficulty and costs, resulting in price gains of 10.1% and 1.3%, he added. Lu Zhengwei, chief economist at Industrial Bank, expects the November PPI to register -2.2% year-on-year, down 0.1 percentage points from the previous month. The National Bureau of Statistics will release CPI and PPI data for November on Dec 10.

New yuan loans in November are expected to reach around CNY600 billion, reflecting a seasonal month-on-month rebound and a modest year-on-year increase, Wang Qing, chief macro analyst at Oriental Jincheng, told Securities Daily. The completion of the CNY500 billion tranche of new policy-based financial instruments issued in October will be a key driver, he noted. Meanwhile, the distortions to credit data caused by local government implicit debt swap operations should ease as the program nears its end for the year. According to Ni Jun, chief banking analyst at GF Securities, bill discount rates remained relatively high in mid-November before easing toward month-end, suggesting that credit demand in the real economy is beginning to recover.