MNI China Daily Summary: Friday, September 12

POLICY: China will front load part of the 2026 new local government debt quota to accelerate the resolution of existing hidden debt, Finance Minister Lan Foan said, noting the overall government debt level remaining within a “reasonable and controllable range”.  

POLICY: China’s fiscal policy has ample room to expand while keeping risks in check, Finance Minister Lan told reporters, adding that a key focus will be on strengthening coordination between fiscal and monetary policy. 

POLICY: China’s new energy storage capacity will reach over 180 million kilowatts by the end of 2027, up from 73.7 million kilowatts at the end of 2024, the nation’s National Energy Administration (NEA) said.

DATA: China's new yuan loans rose by CNY590 billion in August, reversing some of July's CNY50 billion fall, data by the People's Bank of China (PBOC) showed. Total social financing rose by CNY2.57 trillion, accelerating from July's CNY1.16 trillion. M2 money supply grew by 8.8% y/y, beating market forecasts of 8.6% growth and remaining the same as July's 8.8% growth.

LIQUIDITY: The PBOC conducted CNY230 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY41.7 billion after offsetting maturities of CNY188.3 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4575% from 1.4813% , Wind Information showed. The overnight repo average decreased to 1.3646% from 1.3706%. 

YUAN: The currency strengthened to 7.1224 against the dollar from the previous 7.1235. The PBOC set the dollar-yuan central parity rate lower at 7.1019, compared with 7.1034 set on Thursday. The fixing was estimated at 7.1069 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.8650%, up from the previous close of 1.8606%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.12% to 3,870.60, while the CSI300 index decreased 0.57% to 4,522.00. The Hang Seng Index rallied 1.16% to 26,388.16.

FROM THE PRESS: China's 27 city and rural commercial banks held about CNY36 trillion as of end-June, up CNY3 trillion from the end of 2024, Yicai reported. City and rural commercial banks lifted their share of listed-bank assets from below 11% in 2024 to about 11.21% at the end of June, after faster balance-sheet expansion relative to state-owned and joint-stock peers. Data from the National Financial Regulatory Administration show the sector’s average NIM at 1.42% by end-Q2, with city commercial banks at 1.37% and rural commercial banks at 1.58%. Non-performing loan ratios have fallen in 11 city and rural commercial banks since December 2024, with 12 unchanged and four rising, Yicai noted.

China will pilot market-oriented reform in 10 regions, including Beijing, Chengdu and the Greater Bay Area, focusing on the allocation of technology, land, human resources, data, capital and environmental resources, the State Council announced. Li Chunlin, deputy director at the National Development and Reform Commission, said that while China has achieved market-based pricing for most goods and services since the reform and opening, the system for factors of production remains underdeveloped, limiting the market’s decisive role in resource allocation. He said the pilot reforms will identify pathways for more efficient allocation across broader areas. The pilots will run for two years and are scheduled for completion in 2027, Li added.

China will take necessary measures to safeguard its legitimate rights and interests following Mexico's imposition of import tariffs on roughly 1,400 categories of goods, including automobiles, toys, steel, textiles, and plastic products, of between 10% and 50%, the Ministry of Commerce has said. The ministry’s spokesperson said countries should strengthen coordination to defend free trade and multilateralism, rather than yield to external pressure at the expense of third-party interests. Analysts noted that Mexico’s move appears aligned with the U.S.’s long-standing efforts to constrain China, Yicai said.