MNI China Press Digest Dec 5: Yuan, CPI, New Loans

Highlights from Chinese press reports on Friday:

• The Chinese yuan is likely to “break 7” against the U.S. dollar in the short term, chief economists told Securities Daily, though they cautioned that the currency’s ability to remain below the 7.0 threshold is still uncertain. The remarks follow a 21-basis-point increase in the renminbi’s central parity rate to 7.0733, the highest level since October last year, while the onshore yuan closed at 7.069 on Thursday, down 29bp from the previous session. Experts attributed the yuan’s recent appreciation to a confluence of supportive factors, noting that the fourth quarter was traditionally the peak season for corporate foreign-exchange settlement. Strong export performance, with U.S. dollar-denominated exports rising 5.3% year-on-year in the first 10 months, has further concentrated settlement demand. Additionally, some companies may opt to settle foreign exchange earlier to lock in renminbi revenues ahead of potential U.S. dollar volatility and Federal Reserve rate cut uncertainty.
• China’s November CPI is expected to rise 0.9% year-on-year, faster than the 0.2% in October, according to Wen Bin, chief economist at Minsheng Bank. He noted that food prices have strengthened, with the agricultural wholesale price 200 index rising 4.4% month-on-month. Colder temperatures reduced the supply of vegetables and fruits and increased transportation difficulty and costs, resulting in price gains of 10.1% and 1.3%, he added. Lu Zhengwei, chief economist at Industrial Bank, expects the November PPI to register -2.2% year-on-year, down 0.1 percentage points from the previous month. The National Bureau of Statistics will release CPI and PPI data for November on Dec 10.
• New yuan loans in November are expected to reach around CNY600 billion, reflecting a seasonal month-on-month rebound and a modest year-on-year increase, Wang Qing, chief macro analyst at Oriental Jincheng, told Securities Daily. The completion of the CNY500 billion tranche of new policy-based financial instruments issued in October will be a key driver, he noted. Meanwhile, the distortions to credit data caused by local government implicit debt swap operations should ease as the program nears its end for the year. According to Ni Jun, chief banking analyst at GF Securities, bill discount rates remained relatively high in mid-November before easing toward month-end, suggesting that credit demand in the real economy is beginning to recover.