MNI China Daily Summary: Monday, December 22

EXCLUSIVE: The People’s Bank of China (PBOC)’s benchmark loan rate held steady for a seventh consecutive month on Monday, but economists and traders expect further easing in the first quarter as economic headwinds hit.

POLICY: China’s Loan Prime Rate was held steady on Monday in line with expectations, as the central bank focuses on addressing structural issues while maintaining a cautious stance toward broad-based policy rate cuts. According to a statement on the PBOC website, the LPR was unchanged at 3.0% for the one-year maturity and 3.5% for the five-year tenor and over.

POLICY: The PBOC will permit one-time credit repair measures for individuals with small overdue amounts, officials told reporters on Monday.

LIQUIDITY: The PBOC conducted CNY67.3 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net drain of CNY63.6 billion after offsetting maturities of CNY130.9 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4337% from 1.4413%, Wind Information showed. The overnight repo average decreased to 1.2705% from 1.2706%. 

YUAN: The currency strengthened to 7.0382 against the dollar from the previous 7.0410. The PBOC set the dollar-yuan central parity rate higher at 7.0572, compared with 7.0550 on Friday. The fixing was estimated at 7.0423 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.8300%, down from the previous close of 1.8315%, according to Wind Information. 

STOCKS: The Shanghai Composite Index edged up 0.69% to 3,917.36, while the CSI300 index increased 0.95% to 4,611.62. The Hang Seng Index rose 0.43% to 25,801.77. 

FROM THE PRESS: The yuan is expected to gradually appreciate to around 6.0 from 7.0 against the U.S. dollar over the next decade, Huang Qifan, former mayor of Chongqing city, said. By allowing a moderately appreciation of the exchange rate, China can enhance the yuan’s purchasing power, promote import growth, and boost the goal of doubling per capita GDP in U.S. dollar terms in the medium to long term, said Huang. He also called for reducing the scale of export tax rebates to allow more fiscal resources to be used for social welfare and innovation development. (Source: Beijing Business Today)

China's authorities moved to regulate price competition on internet platforms, combating predatory pricing, price discrimination, collusion and other unfair practices, Securities Daily reported Monday, citing a document issued by the National Development and Reform Commission and two other departments. The move will protect consumers’ rights by preventing discriminatory pricing based on big data and false discounts, as well as encouraging platform companies to invest in building core competitiveness, such as technological innovation and service upgrades, the newspaper said, citing analysts.

China's offshore financial operations are stabilising, with the offshore financial index rising 0.31% to 106.5 in 2024 from 2023, Yicai.com reported, citing a report by the Shanghai Chief Economist Financial Development Center. Sub-indices measuring the scale of offshore bond issuance and offshore trade settlement increased by 3.04% and 1.28% y/y, while that of cross-border RMB receipts and payments exceeded CNY35 trillion, a rise of about 14% y/y. It is necessary to expand the full-chain functions of offshore yuan in pricing, settlement, investment and financing, and accelerate the global layout of the Cross-border Interbank Payment System (CIPS), the report said.