MNI China Daily Summary: Thursday, Jan 15

POLICY: China will not use the yuan exchange rate to gain a competitive edge in international trade, Zou Lan, vice-governor at the People’s Bank of China, told reporters.

POLICY: China’s macroeconomic policies will positively impact prices in 2026, Zou Lan, vice-governor at the People’s Bank of China, told reporters.

POLICY: The People's Bank of China will conduct flexible government bonds trading in 2026, to keep liquidity ample and support issuance of government bonds, said Zou Lan, the vice-governor, in a briefing.

POLICY: The PBOC has room to cut the reserve requirement ratio (RRR) and interest rates in 2026, with the current yuan exchange rate level and lenders’ interest margin not posing a strong constraint on such moves, Vice-Governor Zou Lan told reporters.

POLICY: The PBOC announced its intention to cut interest rates on its structural facilities by 25 basis points, and expanded their scale and scope to support key sectors and boost domestic demand, Vice-Governor Zou Lan told reporters.

POLICY: China's M2 money supply grew by 8.5% y/y in December, marking the highest reading since August, beating both the 8.0% forecasted and November's 8.0% gain, data released on Thursday by the People's Bank of China showed.

LIQUIDITY: The PBOC conducted CNY179.3 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY175.3 billion after offsetting maturities of CNY4 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.5024% from 1.5668% previously, Wind Information showed. The overnight repo average decreased to 1.3672% from the previous 1.3920%.

YUAN: The currency strengthened to 6.9698 against the dollar, from 6.9734 at Wednesday's close. The PBOC set the dollar-yuan central parity rate lower at 7.0064, compared with 7.0120 set on Wednesday. The fixing was estimated at 6.9705 by a Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.8440%, down from Wednesday's close of 1.8530%, according to Wind Information.

STOCKS: The Shanghai Composite Index fell 0.33% to 4,112.60, while the CSI300 index rose 0.20% to 4,751.43. The Hang Seng Index declined 0.28% to 26,923.62.

FROM THE PRESS: China’s external environment will become more complex and volatile this year, with rising uncertainties and sustained external pressures, said Su Jian, professor at the School of Economics at Peking University, after data was released showing that China’s total foreign trade in 2025 reached CNY45.4 trillion, up 3.8% y/y. Su noted that competition among major powers is likely to persist, while global rivalry over minerals, shipping routes and markets may intensify. Wang Jun, deputy director of the General Administration of Customs, also stated at a press conference that uncertainties and unpredictable factors in the external environment are expected to rise in 2026 and that the pressure to stabilise foreign trade will remain significant. Looking ahead to China–ASEAN trade relations in 2026, Ding Yusen, director of the Information Centre at the Southeast Asia Economy and Politics Research Institute of Guangxi Zhuang Autonomous Region, anticipates that more Chinese enterprises will step up investment in the ASEAN market, with the institutional dividends from trade and investment facilitation expected to be further unlocked.

The central bank will conduct CNY900 billion of outright reverse repo operations on Thursday, resulting in a net increase of CNY300 billion in January, marking the fifth consecutive month of expanded rollovers, Yicai reports. Dong Ximiao, chief researcher at Zhaolian, told Yicai that January was typically a peak period for bank lending and a major tax payment period for enterprises. Combined with heightened cash withdrawals ahead of the Spring Festival, demand for liquidity has risen, Dong noted. Ming Ming, chief economist at CITIC Securities, noted that the central bank is likely to maintain its accommodative liquidity in light of mounting pressure from upcoming government bond issuance as well as a seasonal rebound in cash demand ahead of the Spring Festival.

China will extend its personal income tax refund policy for homeowners who sell their own residences and repurchase a home on the market within one year, 21st Century Business Herald reports. Specifically, if the purchase price of the new home is equal to or higher than the price of the previous home, the full amount of personal income tax paid will be refunded. The extension will be in effect from Jan 1, 2026, to Dec 31, 2027. In certain cases, individuals are exempt from personal income tax when selling their homes, as many cities offer preferential tax policies for residential transactions. For example, in Shanghai, if an individual sells a self-occupied home that has been owned for more than five years and is the family’s only residence, the income from the transaction is exempt from personal income tax.