MNI China Daily Summary: Monday, December 1

DATA: China's RatingDog manufacturing PMI, previously known as the Caixin manufacturing PMI, came in at 49.9 in November, down from October's 50.6, falling into the contraction zone below the 50 mark after a three-month expansion, the publisher said.

POLICY: China’s export control regime continues to create operational challenges for European companies, according to the European Union Chamber of Commerce in China, citing a survey released on Monday that showed the export licence approval process exceeded the official 45-day timeframe for 40% of respondents.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY107.6 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net drain of CNY231.1 billion after offsetting maturities of CNY338.7 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4580% from 1.4668%, Wind Information showed. The overnight repo average increased to 1.3062% from 1.3033%. 

YUAN: The currency strengthened to 7.0725 against the dollar from the previous 7.0794. The PBOC set the dollar-yuan central parity rate lower at 7.0759, compared with 7.0789 set on Friday. The fixing was estimated at 7.0713 by a Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.8100%, up from the previous close of 1.8090%, according to Wind Information. 

STOCKS: The Shanghai Composite Index edged up 0.65% to 3,914.01, while the CSI300 index increased 1.10% to 4,576.49. The Hang Seng Index rose 0.67% to 26,033.26. 

FROM THE PRESS: China’s official manufacturing PMI rose to 49.2 in November, an increase of 0.2 points from October, according to Yicai, although it remained below the 50 mark for the eighth consecutive month. China Federation of Logistics and Purchasing special analyst Zhang Liqun noted that policymakers should further reinforce counter-cyclical macroeconomic measures and significantly expand investment in public goods and services to promptly reverse the demand contraction. Zhang added that despite the slight improvement, the manufacturing PMI remains weak due to elevated external uncertainties and the ongoing adjustment in China’s property market, both of which continue to weigh on manufacturing demand.

Investors should avoid making one-way bets on the yuan’s exchange rate, warned Guan Tao, former senior official at the State Administration of Foreign Exchange. Although supportive factors currently dominate and the yuan may break below the 7.0 level, Guan argued the currency's ability to stabilise below that level remains uncertain. Should the year-end Central Economic Work Conference communiqué not emphasise exchange-rate stability, authorities may be signalling greater tolerance for volatility, which would open the door to wider fluctuations, he noted. Rather than assume a new appreciation cycle, Guan encouraged investors to adapt to the “new normal” of two-way volatility in the foreign-exchange market.

The scale of newly issued special bonds nationwide reached approximately CNY492 billion in November, 71% higher than October, Securities Daily reports. CITIC Securities chief economist Ming Ming told the newspaper that the sharp expansion provided strong funding support for construction projects across many regions. China Society of Commercial Economy vice president Song Xiangqing said the larger scale delivers immediate effects in stabilising investment and would help manage economic fluctuations. In addition to traditional infrastructure, issuance designated for “land reserve” purposes has reached roughly CNY503 billion in H2, the news outlet reported. Meanwhile, many regions have also begun directing special bond funds toward patient capital, allocating them to government investment funds.