MNI China Daily Summary: Wednesday, November 12

EXCLUSIVE: China's foreign exchange administration is trying to persuade more companies to hedge exchange-rate risk, warning that authorities will permit greater fluctuations of the currency in future and that international markets face rising volatility, economists, exporters and officials told MNI.

EXCLUSIVE: China’s consumer price index is expected to rise modestly to around 0.6% y/y in 2026, after October’s 0.2% increase – the fastest pace since January and above the -0.1% average for the first 10 months – as improving pork prices support headline inflation, partly offset by a slowdown in core readings as gold-price momentum eases, local economists and analysts told MNI.

POLICY: China is willing to increase imports of high-quality Spanish products and cooperate in emerging fields such as new energy, President Xi Jinping told King Felipe VI of Spain during a meeting in Beijing, central state media outlet Xinhua reported.

LIQUIDITY: The PBOC conducted CNY195.5 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY130 billion after offsetting maturities of CNY65.5 billion today, according to Wind Information

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4904% from 1.5126%, Wind Information showed. The overnight repo average decreased to 1.4192% from 1.5094%.

YUAN: The renminbi strengthened to 7.1172 to the dollar from 7.1207 on Tuesday. The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.0833 on Wednesday, compared with 7.0866 set on Tuesday. The fixing was estimated at 7.1148 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 1.7775%, declined from Tuesday's close of 1.7800%, according to chinamoney.com.cn.

STOCKS: The Shanghai Composite Index was down 0.07% to 4,000.14, while the CSI300 index fell 0.13% to 4,645.91. The Hang Seng Index edged up 0.85% at 26,922.73.

FROM THE PRESS: The yuan will remain stable with limited inverse fluctuations against the U.S. dollar, supported by economic fundamentals as timely strengthening of counter-cyclical adjustments will likely offset potential export weaknesses, Securities Daily reported citing Wang Qing, analyst with Golden Credit Rating. The dollar may show strong resilience against further declines given its significant fall earlier this year and the partly factored-in additional U.S. Federal Reserve rate cuts, said Wang. The yuan is expected to appreciate moderately overall next year assuming no unexpected changes in exports, the Daily said citing Ming Ming, chief economist at CITIC Securities.

The Chinese economy is expected to continue its steady growth trend in 2026, potentially setting an “around 5%” annual growth target, Securities Daily reported citing economists. Fiscal policy will maintain a “more proactive” tone, and the issuance of new ultra-long-term special treasury may be increased to CNY1.6-1.8 trillion and the new quota for local government special bonds may be raised to CNY4.8 trillion, the newspaper said citing Zhang Ning, senior China economist at UBS. There could be about two reserve requirement ratio cuts in 2026, with a total reduction of about 100 basis points, as well as 1-2 interest rate cuts, with each cut being 10 basis points, the newspaper said citing analysts from Everbright Securities.

The production and sales of new energy vehicles in October reached 1.77 million and 1.72 million units, representing year-on-year increases of 21.1% and 20.0%, China Securities Journal reported citing data by China Association of Automobile Manufacturers. New energy vehicles accounted for 51.6% of total new car sales, marking the first time their market share has exceeded 50%, the newspaper said. Automobile production and sales are both expected to hit a record high of exceeding 34 million units this year, largely stimulated by the trade-in policy, the Journal said citing Chen Shihua, deputy secretary-general of CAAM.