MNI China Daily Summary: Wednesday, January 18

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY133 billion of operations via 7-day reverse repos and CNY447 billion via 14-day reverse repos with the rates unchanged at 2.00% and 2.15%, respectively. The operation led to a net injection of CNY515 billion after offsetting the maturity of CNY65 billion of reverse repos today, according to Wind Information. The operation aims to hedge the impact of tax paying and cash injection peak to keep banking system liquidity stable before Chinese New Year, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 2.2634% from the close of 2.3221% on Tuesday, Wind Information showed. The overnight repo average increased to 1.9289% from the previous 1.8566%.

YUAN: The currency strengthened to 6.7623 against the dollar from 6.7652 on Tuesday. The PBOC set the dollar-yuan central parity rate higher at 6.7602, compared with 6.7222 set on Tuesday.

BONDS: The yield on the 10-year China Government Bond was last at 2.9350%, higher than Tuesday's close of 2.9200%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.01% at 3,224.41, while the CSI300 index decreased 0.17% to 4,130.31, The Hang Seng Index gained 0.47% to 21,678.00.

FROM THE PRESS: China’s 31 provinces have announced an average GDP growth target of 5.9% in 2023, 0.4 pp lower than the average target of 6.3% in 2022, according to Yicai.com. The news outlet said expanding domestic demand and industrial transformation were seen as priorities, when it analysed the outcome of recent local two-session meetings. The average growth of local fixed asset investment in 2023 is 8.4%, with retail sales of consumer goods averaging 7.9%. The paper noted local targets are usually higher than the national rate, with the overall target typically closer to the Shanghai mark, which this year is set at 5.5%.

China’s growth rate in 2023 is likely to return to normal, as firms increase investment and consumption rebounds, Vice-Premier Liu He has told an audience at Davos. Beijing welcomes foreign investment and seeks to expand foreign trade, as these are strong pillars of China’s economic progress. On real estate, the rapid pace of urbanisation provides strong demand fundamentals for future stability, and the government will continue to work on de-risking the sector. Liu said international cooperation should focus on ensuring energy and food security.

Authorities will take measures that improve housing demand and boost market confidence in 2023, but avoid speculative practices, the Ministry of Housing and Urban-Rural Development said at its recent Work Conference. The ministry said it plans to continue the transformation of shanty towns and support for young people, and will start construction of 3.6 million affordable rental housing units. It will work towards improving the balance sheets of high quality developers, and ensure policies can be adjusted to suit conditions at the local level.