MNI China Daily Summary: Friday, October 24

EXCLUSIVE: Beijing still hopes to resolve trade frictions with the European Union, and to separate its dealings with the bloc from its disputes with the U.S., Chinese policy advisors told MNI, while an official in Brussels said the EU is optimistic that it will obtain an agreement to loosen restrictions on rare earth exports. 

POLICY: China will focus on building a modern industrial system and a strong domestic market over the next five years, aiming to significantly boost residents’ consumption rate and enhance self-reliance in science and technology during its 15th Five-Year Plan period.

POLICY: Dialogue and communication remains the correct choice for China and the U.S. to handle trade relations, Minister of Commerce Wang Wentao told reporters.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY168 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY3.2 billion after offsetting maturities of CNY164.8 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4110% from 1.4267%, Wind Information showed. The overnight repo average decreased to 1.3221% from 1.3169%. 

YUAN: The currency weakened to 7.1230 against the dollar from the previous 7.1221. The PBOC set the dollar-yuan central parity rate higher at 7.0928, compared with 7.0918 set on Thursday. The fixing was estimated at 7.1221 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.8450%, up from the previous close of 1.8330%, according to Wind Information.

STOCKS: The Shanghai Composite Index rose 0.71% to 3,950.31, while the CSI300 index increased 1.18% to 4,660.68. The Hang Seng Index edged up 0.74% to 26,160.15.

FROM THE PRESS: China's total electricity consumption grew by 4.5% y/y to reach 888.6 billion kWh in September, bringing the accumulated growth of the first three quarters to 4.6%, People’s Daily reported citing data by National Energy Administration. The quarterly growth showed a recovery trend, increasing by 2.5%, 4.9% and 6.1% from Q1 to Q3. Industrial power consumption contributed 51% to the overall Q3 growth, with automobile manufacturing, electrical machinery and equipment manufacturing achieving double-digit growth, the newspaper said.

Monetary policy demands steady, sustained judgment, a characteristic that AI's high-frequency data processing capabilities do not yet fully align with, according to Zhou Xiaochuan, former governor of the People's Bank of China, speaking at the 2025 Bund Summit. In contrast, Zhou believes that AI holds greater application potential in the realm of financial stability. Predicting risks requires AI to process vast amounts of both structured and unstructured data, including social sentiment, public opinion, and other multimodal information, Zhou said.

China will emphasise financial support for technology, including increased loans, expanded issuance of tech innovation bonds and encouragement for equity financing and venture capital aimed at technology-based enterprises, according to Wang Qing, chief macro analyst at Dongfang Jincheng, commenting on the communiqué from the Fourth Plenary Session of the 20th Central Committee of the Communist Party. He also noted that regulators will guide more funds toward technological innovation and industrial transformation by optimising and establishing structural monetary policy tools. Wang predicts the introduction of a new round of growth-stabilising policies in the fourth quarter is becoming increasingly necessary.