MNI China Daily Summary: Monday, December 15

DATA: China’s fixed-asset investment growth fell further by 2.6% y/y in the first 11 months, expanding from the 1.7% fall in the Jan-Oct period and missing the -2.3% median forecast, also hitting the lowest level since Jun 2020, National Bureau of Statistics (NBS) data showed. Retail sales slowed for the sixth month, rising 1.3% y/y to hit the lowest level since Dec 2022, down from October's 2.9%, and underperforming the 2.9% forecast. Industrial output grew by 4.8% y/y, slowing from October's 4.9% and missing the 5.0% forecast, also marking the lowest since Aug 2024.

POLICY: China will further improve the investment environment, leverage the guiding role of government investment and stimulate private investment, while focusing on stabilising employment and promoting income growth to enhance consumption capacity and boost consumer confidence, Fu Linghui, NBS spokesperson said.

POLICY: China will continue to implement consumer stimulus to expand domestic demand, control capacity in key industries, and regulate market competition order to promote price rises, Fu Linghui, spokesman of NBS, told reporters.  

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY130.9 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY8.6 billion after offsetting maturities of CNY122.3 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4440% from 1.4691%, Wind Information showed. The overnight repo average decreased to 1.2740% from 1.2747%. 

YUAN: The currency strengthened to 7.0505 against the dollar from the previous 7.0554. The PBOC set the dollar-yuan central parity rate higher at 7.0656, compared with 7.0638 set on Friday. The fixing was estimated at 7.0555 by Bloomberg survey today. 

BONDS: The yield on 10-year China Government Bonds was last at 1.8450%, up from the previous close of 1.8150%, according to Wind Information. 

STOCKS: The Shanghai Composite Index ended 0.55% lower at 3,867.92, while the CSI300 index decreased 0.63% to 4,552.06. The Hang Seng Index fell 1.34% to 25,628.88. 

FROM THE PRESS: China will accelerate the relaxation of restrictions on services demand and implement policies aimed at stimulating consumption in key sectors such as sports events, e-commerce and AI-driven activites, according to Xiao Weiming, vice secretary-general at the National Development and Reform Commission. In a recent keynote speech, Xiao highlighted that efforts will focus on vigorously developing the silver and the ice-snow economy. Additionally, the country plans to leverage central budgetary investments, ultra-long-term special government and new local government special bonds, and innovative policy-based financial tools to drive effective investment expansion.

The introduction of the term "cross-cycle" in the latest Central Economic Work Conference signals a strategic shift in macroeconomic policy, according to Guan Tao, former senior official at the State Administration of Foreign Exchange. Guan explained that while macro policies will remain active, they will not involve excessive stimulus or a "flooding" of the economy. Instead, policies will be more tailored and flexible, leaving room for adjustments as needed. On fiscal policy, Guan noted that the deficit ratio is likely to remain around 4% next year, although the scale of new government debt—encompassing deficits, special bonds and special government bonds—could exceed the CNY11.8 trillion level set for this year. As for monetary policy, Guan highlighted that while the supportive stance will continue, large-scale easing was unlikely.

China must actively pursue new growth opportunities in areas such as expanding consumption and investment, advancing technology and industrial development, and the promotion of urban-rural integration, according to Han Wenxiu, vice director at the Central Financial and Economic Commission. At a recent conference organised by the China Center for International Economic Exchanges, Han acknowledged that China’s current economic development faces complex, intertwined cyclical, structural and institutional challenges. He emphasised the importance of maintaining necessary fiscal deficits, managing total debt levels and ensuring adequate overall expenditure.