MNI China Daily Summary: Friday, May 30
EXCLUSIVE: China’s steel demand could grow slightly in 2025 from 2024’s 4.4% drop to 869 million metric tonnes, beating estimates from the China Metallurgical Industry Planning and Research Institute of a 1.5% fall, as robust manufacturing and export demand offsets continued real-estate weakness, local analysts told MNI.
EXCLUSIVE: China is expected to direct up to several hundred billion yuan from existing central government funds to accelerate urban renewal projects, supplementing this with local government special bond quotas, while reserving additional resources to support domestic demand in the event of future economic uncertainty, policy advisors told MNI.
LIQUIDITY: The PBOC conducted CNY291.1 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY148.6 billion after offsetting the maturities of CNY142.5 billion today, according to Wind Information.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.6644% from 1.6330% on Thursday, Wind Information showed. The overnight repo average increased to 1.4821% from the previous 1.4124%.
YUAN: The currency weakened to 7.1953 versus 7.1916 from Thursday's close. The PBOC set the dollar-yuan central parity rate lower at 7.1848, compared with 7.1907 set on Thursday. The fixing was estimated at 7.1708 by Bloomberg survey today.
BONDS: The yield on 10-year China Government Bonds was last at 1.6525%, up from Thursday's close of 1.6500%, according to Wind Information.
STOCKS: The Shanghai Composite Index edged down 0.47% to 3,347.49, while the CSI300 index fell 0.48% to 3,840.23. The Hang Seng Index was down 1.20% to 23,289.77.
FROM THE PRESS: City level officials are accelerating idle land purchases using local government special bonds, Economic Information Daily reported. A total of 171 city governments have announced acquisition plans valued at CNY390 billion as of May 27, the China Real Estate Information Corporation said, noting a prevalence of third- and fourth-tier cities. However, local special bond actual issuance for such purposes remained below the announced plans, with only CNY123 billion issued as of May 25, the newspaper said, citing Wang Qing, analyst with Golden Credit Rating.
Local governments issued a total of CNY1.5 trillion in new bonds during the first four months, including CNY302 billion in general bonds and CNY1.19 trillion in special-purpose bonds, data from the Ministry of Finance showed. Feng Lin, executive director at the Research and Development Department at Oriental Jincheng, noted total local government bond issuance increased by CNY1.6 trillion y/y, driven mainly by CNY1.6 trillion in refinancing special-purpose bonds used to replace hidden debt. The refinancing has released momentum for infrastructure investment which rose 5.8% y/y in the first four months, 1.4 percentage points faster than the full-year growth rate in 2024.
Local officials are driving domestic demand using innovative consumption subsidies including childcare and marriage vouchers, Shanghai Securities News reported. Guangdong province will issue childcare vouchers up to CNY2,000 per child starting June. Fujian is promoting vouchers covering wedding and childcare costs, and plans to issue birth subsidies to eligible families, the newspaper said.
