MNI China Daily Summary: Friday, November 7

EXCLUSIVE: China will maintain proactive fiscal policy with a modest expansion of debt over the next five years as it seeks potential GDP growth of around 5% and aims to double GDP per capita by 2035, policy advisors told MNI, noting fiscal spending will increasingly focus on bolstering domestic demand.

DATA: Exports in October fell 1.1% y/y to USD305.4 billion, a rapid reduction from the previous 8.3% growth and failed meeting the expectations for a 2.5% increase, data released by China Customs showed. Imports gained 1.0% y/y, slower from 7.4% in September and behind the 2.5% market consensus.

POLICY: Australian firms in China are expressing growing confidence in the outlook for bilateral trade and investment relations, with 80% of respondents to a flash survey noting an improvement since February, the Australian Chamber of Commerce in China said.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY141.7 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net drain of CNY213.4 billion after offsetting maturities of CNY355.1 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4130% from 1.4254%, Wind Information showed. The overnight repo average increased to 1.3321% from 1.3166%. 

YUAN: The currency weakened to 7.1225 against the dollar from the previous 7.1219. The PBOC set the dollar-yuan central parity rate lower at 7.0836, compared with 7.0865 set on Thursday. The fixing was estimated at 7.1151 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.7805%, up from the previous close of 1.7700%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.25% to 3,997.56, while the CSI300 index decreased 0.31% to 4,678.79. The Hang Seng Index lost 0.92% to 26,241.83.

FROM THE PRESS: To effectively boost consumption during the 15th Five-Year Plan, the government must transition from an investment-oriented model to a service-oriented one, providing greater consumer resources through a robust social security system and the expansion of affordable housing, according to Liu Yuanchun, president at the Shanghai University of Finance and Economics. Liu emphasised that state-owned enterprises should increase profit-sharing with the public and prevent excessive monopoly profits from being directly reinvested. He argued that these structural reforms would be more effective in raising consumption than relying on short-term stimulus measures or attempts to reduce income inequality immediately.

More firms in China are shifting focus to the domestic market, given uncertainty in the export outlook, intense competition and exposure to logistics costs, Yicai report, noting this year’s November Double 11 shopping event was both a challenge and an opportunity. The firms faced difficulties from China’s complex distribution network, differences in consumers’ preferences and usage habits, and a lack of professionals familiar with the domestic market.

China will continue to expand market access in the service sector, advance the development of key foreign-invested projects and ensure equal participation of foreign enterprises in government procurement, according to Ling Ji, vice minister at the Ministry of Commerce. Speaking at a roundtable meeting with foreign-funded enterprises in Shanghai, Ling said the government will implement tax credit policies for reinvestment, strengthen intellectual property protection and further cultivate a world-class, market-oriented, law-based business environment. The meeting was attended by representatives from more than 30 foreign companies and business associations in China, including Nissan Motors, LEGO and the China-Britain Business Council.