MNI China Daily Summary: Thursday, October 23

POLICY: China and the U.S. will hold a new round of trade talks in Malaysia from Oct 24 to 27, according to a statement on the Ministry of Commerce website.

POLICY: China’s macro policies should be strengthened to ensure economic growth this year, and measures taken to promote both domestic and international circulation over the next five years in line with the goal of reaching moderately-developed-level per capita GDP by 2035, according to the communiqué of the Fourth Plenary Session of the 20th Central Committee of the Communist Party of China.

POLICY: China will boost consumption and expand effective investment to build a strong domestic market, while increasing efforts to safeguard and improve people’s livelihoods in the next five years, according to the Communiqué of the Party’s Fourth Plenary Session held in Beijing this week, Xinhua News Agency reported.

POLICY: China will maintain an appropriate share of manufacturing and establish a modern industrial system with advanced manufacturing as backbone, the Communiqué of the Party’s Fourth Plenary Session said.

POLICY: Regulators likely need to address the outcomes and actions generated by black-box artificial intelligence models to regulate financial markets, even though the impact of AI on the formulation and implementation of monetary policy is not significant at present, said former governor of People’s Bank of China Zhou Xiaochuan said at Bund Summit in Shanghai.

POLICY: Exchange rate hedging is essential for Chinese firms as their trade becomes increasingly diverse, State Administration of Foreign Exchange Deputy Director Liu Bin said at the Bund Summit.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY212.5 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net drain of CNY23.5 billion after offsetting maturities of CNY236 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4267% from 1.4327% previously, Wind Information showed. The overnight repo average was at 1.3169%, up from the previous 1.3167%. 

YUAN: The currency strengthened to 7.1221 against the dollar from the previous 7.1245. The PBOC set the dollar-yuan central parity rate lower at 7.0918, compared with 7.0954 set on Wednesday. The fixing was estimated at 7.1226 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.8330%, up from the previous close of 1.8280%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.22% to 3,922.41, while the CSI300 index increased 0.30% to 4,606.34. The Hang Seng Index gained 0.72% to 25,967.98.

FROM THE PRESS: Fixed-deposit rates in China continued a mild downward trajectory in September, according to a report by the Rong360 Digital Technology Research Institute. Compared with the previous month, deposit rates for three-month to five-year maturities fell between 0.1bp to 0.4bp. Meanwhile, average interest rates for certificates of deposit (CDs) showed the one-year rate declined by 1.39bp, the two-year rate remained unchanged and the three-year rate climbed by 5.93bp. The three-year CD rise was largely driven by small and medium-sized banks, said Ai Yawen, an analyst at Rong360. “To meet year-end funding targets, these banks may be temporarily adjusting customer acquisition strategies, launching new CD products and offering higher rates to attract more depositors,” said Ai.

Recent data on industrial enterprise prices and profits have shown improvement, indicating that efforts to curb over competition are beginning to yield results, according to Yicai News. Guo Lei, chief economist at GF Securities, noted that the quarterly rebound in industrial capacity utilisation demonstrates the positive impact of anti-over competition measures. While utilisation in ferrous metal smelting declined, it remained above 80%, higher than last year’s level. By contrast, coal and non-metallic minerals posted both low and declining utilisation rates, underscoring the need for continued capacity optimisation. Deng Zhou, a researcher at the Chinese Academy of Social Sciences, emphasised that addressing disorderly price competition needed the market to play a decisive role in resource allocation while improving regulatory oversight.

Lao Pu Gold and Chow Tai Fook, two leading domestic jewelry brands, plan to raise product prices at the end of October, marking their third increase this year, even as domestic and international gold assets fall across the board, Yicai reported. Ironically, consumer enthusiasm to “buy before prices rise” has triggered another wave of gold buying at physical stores. If gold enters a period of volatile adjustment and with the retail promotion season approaching, brands may opt to fine-tune retail prices through “labour cost discounts” or “cash-back per gram” promotions, analysts said. While e-commerce platforms are rolling out “Double 11” shopping festival promotional discounts, physical stores have not followed suit, Yicai noted.