MNI China Daily Summary: Thursday, November 20

EXCLUSIVE: Talks between the European Union and China to loosen restrictions on rare earth exports are making little progress, policy advisors in Beijing told MNI, as EU officials said that Brussels has decided to elevate the danger posed by China to its key industries to a fixed subject for discussion at regular meetings of the bloc’s finance ministers. 

POLICY: Remarks regarding Taiwan by Japan's Prime Minister Sanae Takaichi have had a serious negative impact on economic and trade exchanges between Beijing and Tokyo, Ministry of Commerce spokesperson He Yongqian said at a press conference in Beijing.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY300 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY110 billion after offsetting maturities of CNY190 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4857% from 1.5131% previously, Wind Information showed. The overnight repo average was at 1.3652%, down from the previous 1.4221%. 

YUAN: The currency weakened to 7.1167 against the dollar from the previous 7.1096. The PBOC set the dollar-yuan central parity rate higher at 7.0905, compared with 7.0872 set on Wednesday. The fixing was estimated at 7.1228 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.7825%, down from the previous close of 1.7838%, according to Wind Information.

STOCKS: The Shanghai Composite Index decreased 0.40% to 3,931.05, while the CSI300 index declined 0.51% to 4,564.95. The Hang Seng Index edged up 0.02% to 25,835.57.

FROM THE PRESS: Chinese travellers have cancelled more than 500,000 flight tickets to Japan, with passenger numbers sharply down for three consecutive days, as geopolitical tensions between the two countries intensify, according to Yicai. Aviation expert Li Hanming noted that the drop in numbers for Tokyo was less than Osaka and other second-tier Japanese cities, suggesting the withdrawing passengers were leisure travellers. Yicai reported that some domestic airlines have begun temporarily cancelling Japan-bound flights and reallocating capacity to markets with stronger demand. In turn, tourist flows are expected to shift toward destinations such as South Korea and Russia.

China must intensify efforts to drive the digital and intelligent transformation of its manufacturing sector while advancing the innovative development of state-owned enterprises, Vice Premier Zhang Guoqing emphasised during research visits to Guizhou Province and Chongqing Municipality. Zhang called for solid progress in upgrading traditional industries, cultivating and expanding emerging sectors and planning strategically for future industries. He noted that the development of new quality productive forces should be pursued in line with local strengths and conditions. He also underscored the need to accelerate the integration of large AI models into enterprises’ R&D, design and production processes.

During the 15th Five-Year Plan, China must elevate the consumption share of GDP from the current 56% to 60%–65% and achieve annual consumption growth of more than 6%, according to Teng Tai, president of the Wanbo New Economy Research Institute. Teng said authorities should consider trillion-yuan income subsidies, state-owned equity transfers to the social security fund and capital market value expansion of trillions of yuan. Zero or even negative interest rate policies may also be needed to counteract deflationary pressures, Teng added.