Sector Report on China 13.12.2021

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Financial Authorities Declarations

  • Flash News!

-The Ministry of Commerce (MOC) expected that FDI in actual use in mainland China will exceed 1 trillion Yuan in 2021. GAO Feng the spokesperson of the MOC declared that ‘’China will further shorten the negative list on foreign investment, facilitate services for foreign-funded enterprises and projects, and foster a law-based, international, and convenient business environment to share its market opportunities globally”.

-A coffee trading platform was launched in Shanghai to satisfy the increasing demand of coffee market in China. Expectations plan a volume of 3.5 billions Yuan in 2022 with 8000 domestic and foreign dealers by 2025.

-The comprehensive bonded zone in Qinzhou, a coastal city in the Guangxi Zhuang Autonomous Region, started operations on December 8 welcoming 10 container trucks.

  • The CBIRC data on Insurance Sector
Insurance Sector Q1-Q2-Q3 Units
Average Solvency ratio 240%
Average Core Solvency ratio 227.3%

 

  • The CSRC approved IPO !

The China Securities Regulatory Commission. (CSRC) approved IPO of Guangdong Weide Information Technology Co., Ltd., Mabwell (Shanghai) Bioscience Co., Ltd. and C*Core Technology Co., Ltd. will on  the Shanghai STAR market.

Central Bank Operations and declarations

Date Operations Maturity Amount Interest rate
December 6 Reverse Repo 7-days 10 Billion Yuan 2.2%
December 7 Reverse Repo 7-days 10 Billion Yuan 2.2%
December 8 Reverse Repo 7-days 10 Billion Yuan 2.2%
December 9 Reverse Repo 7-days 10 Billion Yuan 2.2%
December 10 Reverse Repo 7-days 10 Billion Yuan 2.2%

 

  • RRR moves !

The PBOC indicates that cash that institutions must hold in reserve will be cut from December 15 in a move to inject more liquidity in the Market.

The RRR will be cut by 50 basis points expecting for institutions that have already a 5% ratio. The new RRR will be 8.4% expecting to release 1.2 trillion Yuan and save 15 billion yuan a years in financing costs.

In addition, the RRR  for foreign currency deposits will be raised by 2 pp to 9% starting December 15.

  • PBOC on Hong Kong roles

People’s Bank of China Governor, YI Gang, declared that PBOC will continue the development of Hong Kong as international financial center.

“The People’s Bank of China will make efforts to optimize financial market connectivity mechanisms linking the Chinese mainland and the special administrative region, and develop more yuan-denominated products […] The central bank will also seek closer cooperation with Hong Kong in central bank digital currency and regulatory technology, and support the development of green finance in the region” he said.

  • New measures to help SME and agriculture sector

The PBOC indicates that it will lower the relending rates for agriculture sector and SME by 0.25 pp starting December 7.

“After the reduction, the interest rates of three-month, six-month, and one-year reloans supporting the development of agriculture and small firms stood at 1.7 percent, 1.9 percent and 2 percent, respectively […] The interest rates for rediscounts and financial stability-related reloans remained unchanged at 2 percent and 1.75 percent” as indicated in PBOC website.

Government Declarations

  • The Annual Central Economic Work Conference

At the annual Central Economic Work Conference, Chinese authorities emphasized the need to properly understand the major economic and development issues of the country.

« As China enters a new stage of development, its internal and external environment has undergone profound changes. The country is faced with major theoretical and practical issues that need to be properly comprehended, » as written in a statement released after the annual Central Economic Work Conference.

Especially, it is indicated that the country should support wealth creation and accumulation while avoiding polarization of the society. In this case, the main objectives of the Authorities is the “job-fist policy” to support high-quality development.

In addition, the document stressed the importance of to understand the “nature” of the capital and the related behavior’s law as its has both positive and negative effects. The main goal is goal is to limit the negatives ones.

“Basic public services should be provided in a targeted manner in fields that concern people the most, such as education, healthcare, old-age care and housing” as indicated.

The document reaffirmed that Government will improve monitoring of capital to prevent unchecked growth.

Concerning financial aspects, Authorities highlighted the need the properly gauge and defuse major risks. Consequently, improvements of financial legal system, responsibilities of local governments and regulators will be enhanced.

“China should formulate policies to defuse risks and improve the mechanism for handling financial risks” the statement said.

During the conference, the Government confirmed pursuing a proactive fiscal policies and a prudent monetary policy (according to  PBOC) to sustain activities. New fees and tax cuts will be established for SME firms, individual businesses and key sectors in needs. However, Central Government urged Local Authorities to avoid ‘’hidden debt’’.

“Actions should be taken to safeguard macroeconomic stability, keep major economic indicators within an appropriate range and maintain social stability to prepare for the Party’s 20th National Congress” as indicated.

  • Data published 
November 2021 Units
CPI +2.3% yoy
Monthly CPI +0.4% mom
CPI Target 3% in 2021
PPI +12.9% yoy
Monthly PPI +0.0% mom
Total Trade 35.39 Trillion Yuan
-growth +22% yoy
Exports +21.8% yoy
Imports +22.1% yoy
November 2021 Units
New Yuan  deno Loans 1.27 Trillion Yuan
— growth -160.5 Bln yoy
M2 235.6 Trillion Yuan
— growth +8.5% yoy
M1 63.75 Trillion Yuan
— growth +3% yoy
M0 8.74 Trillion Yuan
— growth +7.2% yoy
Net cash Injection in November 134.8 Billion Yuan

 

 

Sources : Ministry of Finance, People’s Bank of China and the State Administration of Foreign Exchange, National Bureau of Statistics, Ministry of Commerce, Ministry of Finance, General Administration of Customs, State-owned Assets Supervision and Administration Commission

 

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