MNI China Daily Summary: Wednesday, December 10

EXCLUSIVE: Evolving business conditions in China are prompting German member firms – large industrial players and specialised Mittelstand SMEs – to deepen their integration, expand operations, and use the country as a base for global exports, a senior representative of the German business community in Beijing told MNI, noting that sustained high levels of FDI into China are seen as essential.

EXCLUSIVE: Chinese authorities are preparing new policies to expand service-sector market access as Beijing seeks to attract more foreign direct investment while emphasising the need to strengthen comparative advantage in trade with key partners, MNI understands.

DATA: China’s Consumer Price Index rose 0.7% y/y in November, up from October's 0.2% growth to hit the highest level since March 2024, in line with expectations for a 0.7% gain, according to data from the National Bureau of Statistics. The Producer Price Index fell 2.2% y/y in November, expanding from October's 2.1% drop, marking the 38th straight month of decline. The figure underperformed the median forecast of -2.0%.

POLICY: The IMF has revised its China GDP growth projection upwards to 5.0 percent in 2025 and 4.5 percent in 2026, 0.2 and 0.3 percentage points higher than the previous estimate from October, a country mission report from the fund said on Wednesday, with the uptick driven by macroeconomic policy measures and lower-than-expected tariffs on exports.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY189.8 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY110.5 billion after offsetting maturities of CNY79.3 billion today, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.4521% from 1.4512%, Wind Information showed. The overnight repo average decreased to 1.2882% from 1.2984%.

YUAN: The currency strengthened to 7.0638 to the dollar from the previous 7.0693. The PBOC set the dollar-yuan central parity rate lower at 7.0753, compared with 7.0773 set on Tuesday. The fixing was estimated at 7.0752 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.8325%, up from the previous close of 1.8305%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.23% to 3,900.50, while the CSI300 index fell 0.14% to 4,591.83. The Hang Seng Index gained 0.42% to 25,540.78.

FROM THE PRESS: Authorities can mitigate the adverse effects of an ageing population on tax revenue through stronger support for the technological transformation and smart manufacturing, which would enable businesses to alleviate rising labour costs through automation and digitalisation, stabilising profit margins and the tax base, according to Li Xuhong, vice dean at the National Accounting Institute of Beijing. For income tax, attention should be directed towards high-net-worth and high-income individuals, including cross-border tax sources, Li added.

Analysts from Huatai Securities forecast that China’s cumulative year-on-year decline in fixed-asset investment from January to November could deepen to approximately 2.5%, with the month-on-month drop widening to 11.5%. Persistently weak real-estate investment was driving the decline, although there are signs of a modest improvement to infrastructure investment, analysts added. A CICC report highlighted that while new policy-based financial instruments were largely deployed in October, the physical investments from these initiatives may not be fully reflected until later months, given the onset of winter and reduced construction periods in northern China.

The December Politburo's renewed emphasis on cross-cyclical adjustments signals a shift toward prioritising long-term economic stability and a more balanced approach to structural optimisation. According to Lu Zhe, chief economist at Dongwu Securities, the commitment to moderately loose monetary policy will see the PBOC maintain a supportive stance and focus on improvements to the efficiency of existing funds. In addition to conventional monetary policy tools, structural instruments will play a pivotal role in targeted support for key sectors and addressing vulnerabilities in the economy.