Everything You Need to Know About China's Economy on Tuesday (Sept. 24)
Your Daily & Trustworthy Updates on the Chinese Economy
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Good Tuesday! This is TIAN in Beijing.
Welcome to monitor the pulse of China’s economy together with me.
DRIVING THE DAY, Pan Gongsheng, governor of the People's Bank of China, held a press conference in Beijing, where he announced several major policy adjustments:
China will cut the reserve requirement ratio (RRR) by 0.5 percentage points in the near future, providing about 1 trillion yuan (about 141.78 billion U.S. dollars) in long-term liquidity to the financial market, said Pan.
Depending on the liquidity situation in the market, RRR may be further lowered by 0.25 to 0.5 percentage points within the year, Pan said.
The central bank will reduce the interest rate of seven-day reverse repos from 1.7 percent to 1.5 percent, said Pan.
The reduction was aimed at guiding the loan prime rate (LPR) and deposit rates to move downward and maintaining stability in the net interest margin of commercial banks, Pan said at a press conference.
Under the market-oriented mechanism for adjusting interest rates, lowering the rate of seven-day reverse repos, which is a main policy rate for the central bank, will lead to declines in various benchmark rates, he said.
The interest rate of the medium-term lending facility (MLF) is expected to drop by approximately 0.3 percentage points, and the LPR and deposit rates may decrease by 0.2 to 0.25 percentage points, according to Pan.
The PBOC cut the interest rate of seven-day reverse repos from 1.8 percent to 1.7 percent in July.
China will lower mortgage rates on existing home loans to a level similar to those of newly issued housing loans, said Pan.
The average reduction in mortgage rates for existing home loans is expected to be around 0.5 percentage points, he told the press conference.
"The new policy, which is conducive to further reducing borrowers' mortgage interest expenses, is expected to benefit 50 million households, or a population of 150 million," said Pan.
This move is expected to reduce the total interest expenses for households by approximately 150 billion yuan (about 21.27 billion U.S. dollars) per year on average, which will help boost consumption and investment, he added.
The minimum down payment ratio for both first and second homes will be unified, with the nationwide minimum down payment ratio for second homes to be reduced from 25 percent to 15 percent, Pan said.
MEANWHILE, China will issue a guideline to encourage medium and long-term funds to enter the capital market, the country's top securities regulator said Tuesday.
The guideline seeks to improve the supporting system for the entry of various types of medium and long-term funds into the capital market, Wu Qing, head of the China Securities Regulatory Commission (CSRC), told a press conference.
The CSRC will also release six measures to promote mergers and acquisitions, and work with various parties to facilitate the circulation of private equity and venture capital funds in the process of fundraising, investment, management and withdrawal, Wu said.
More efforts will be made to protect the legitimate rights and interests of small and medium-sized investors, and firm actions will be taken to crack down on illegal activities such as financial fraud and market manipulation, according to Wu.
ALSO ON TUESDAY, China's Ministry of Commerce said it will probe into PVH Corp. of the United States under the unreliable entity list framework for suspected discriminatory measures and other practices violating market trading principles regarding Xinjiang-related products.
The U.S. company is suspected of boycotting cotton products from China's Xinjiang Uygur Autonomous Region without any factual basis, which seriously undermined the legitimate rights and interests of relevant Chinese enterprises, and jeopardized China's sovereignty, security and development interests, said the ministry.
IN TODAY'S FINANCIAL MARKET,
Chinese shares surge on stimulus package
Chinese stocks rallied on Tuesday, fueled by a package of stimulus measures announced on the same day.
The benchmark Shanghai Composite Index was up 4.15 percent to 2,863.13 points, and the Shenzhen Component Index closed 4.36 percent higher at 8,435.7 points.
China's central bank, top securities regulator and financial regulator earlier in the day announced a raft of monetary stimulus, property market support and capital market strengthening measures to support the country's high-quality economic development at a press conference.
The country will cut the reserve requirement ratio, lower mortgage rates on existing home loans, and create new monetary policy tools to support the stock market, among others.
These policies, which exceed market expectations, will boost market confidence, stimulate the vitality of market entities, stabilize credit levels, and enhance the sustainability of financial support for the real economy, said Wen Bin, chief economist at China Minsheng Bank.
Gains are seen across the board on the two bourses, with shares related to steel and coal leading the surge.
The combined turnover of stocks covered by the two indices stood at 974.8 billion yuan (about 138.25 billion U.S. dollars), up from 551 billion yuan recorded on the previous trading day.
The ChiNext Index, tracking China's Nasdaq-style board of growth enterprises, surged 5.54 percent to close at 1,615.32 points Tuesday.
China's benchmark interbank gold prices higher Tuesday
According to the China Foreign Exchange Trade System, the benchmark price for gold that is 99.95 percent pure or above stood at 590.92 yuan (about 83.8 U.S. dollars) per gram, 6.36 yuan higher than the previous trading day.
The price for gold that is 99.99 percent pure or above went up 3.90 yuan from the previous trading day to 592.20 yuan.
Chinese yuan strengthens to 7.0510 against USD Tuesday
The central parity rate of the Chinese currency renminbi, or the yuan, strengthened 21 pips to 7.0510 against the U.S. dollar Tuesday, according to the China Foreign Exchange Trade System.
In China's spot foreign exchange market, the yuan is allowed to rise or fall by 2 percent from the central parity rate each trading day.
Hong Kong's Hang Seng Index surpasses 19,000 points
Hong Kong's benchmark Hang Seng Index surged more than 4 percent to surpass the 19,000 mark during Tuesday's afternoon trading, as a slew of pro-growth measures boosted investor confidence.
The Hang Seng Index hit the highest level since a bull run in the second quarter of this year, while the Hang Seng Tech Index, tracking 30 largest technology companies listed in Hong Kong, jumped over 5.7 percent.
The gains came after a slew of measures announced by China's central bank Tuesday to bolster the economy.
Meanwhile, the stock market saw broad-based gains Tuesday with the benchmark Hang Seng Index soaring 4.13 percent to close at 19,000.56 points.
The Hang Seng China Enterprises Index jumped 5.09 percent to end at 6,714.47 points, while the Hang Seng Tech Index surged 5.88 percent to end at 3,915.58 points.
China's central bank conducts reverse repos Tuesday
China's central bank conducted 460 billion yuan (about 65.24 billion U.S. dollars) of 14-day reverse repos at an interest rate of 1.85 percent Tuesday.
The move aims to keep liquidity reasonable and ample in the banking system at the end of the quarter, the central bank said.
AT THE END OF TODAY'S SHARING, LET'S TAKE A LOOK AT YOUR DAILY FUTURES:
Cotton futures closed higher Tuesday in daytime trading on the Zhengzhou Commodity Exchange (ZCE).
The most active cotton contract for January 2025 delivery gained 145 yuan (about 20.56 U.S. dollars) to close at 14,195 yuan per tonne.
On Tuesday, the total trading volume for six listed cotton futures contracts on the ZCE was 492,077 lots with a turnover of 34.62 billion yuan..
Sugar futures closed higher Tuesday in daytime trading on the Zhengzhou Commodity Exchange.
The most active sugar contract for January 2025 delivery gained 24 yuan (3.40 U.S. dollars) to close at 5,871 yuan per tonne.
On Tuesday, the total trading volume for six listed sugar futures contracts on the ZCE was 370,901 lots with a turnover of 21.75 billion yuan.
Iron ore futures closed higher on Tuesday in daytime trading at the Dalian Commodity Exchange.
The most active iron ore contract for January 2025 delivery gained 31 yuan (about 4.40 U.S. dollars) to close at 699.5 yuan per tonne.
On Tuesday, the total trading volume of 12 listed iron ore futures contracts on the exchange was 1,065,881 lots, with a turnover of about 72.52 billion yuan.
No.1 soybean futures closed higher on Tuesday in daytime trading at the Dalian Commodity Exchange.
The most active No.1 soybean contract for January 2025 delivery gained 24 yuan (about 3.40 U.S. dollars) to close at 4,155 yuan per tonne.
On Tuesday, the total trading volume of six listed No.1 soybean futures contracts on the exchange was 97,410 lots, with a turnover of about 4.03 billion yuan.
About the Newsletter:
Ran by TIAN Dongdong, this newsletter features daily and trustworthy content on China's economy. Having worked in Brussels, London, Cairo, and Tripoli for Chinese media as correspondent for several years, TIAN is now based in Beijing.