MONEY MASTER

Quick Summary China kept its benchmark lending rates unchanged  for the ninth straight month 1-year LPR stays at  3.0% , 5-year LPR at  3.5% Authorities prefer  targeted tools over broad rate cuts Growth expected to slow to  4.5% in 2026 What Happened China left its benchmark  Loan Prime Rates (LPRs)  unchanged in February: 1-year LPR:  3.0% 5-year LPR:  3.5% The decision marks the  ninth consecutive month of steady rates , suggesting policymakers are  not in a hurry to roll out fresh broad-based stimulus . The rates are set by the  People's Bank of China  (PBOC) . Why No Immediate Cuts? While China hit its  ~5% growth target in 2025 , largely thanks to strong exports, several headwinds persist: Structural imbalances Industrial overcapacity Weak domestic consumption Rising geopolitical tensions A Reuters poll forecasts  growth slowing to 4.5% in 2026 . Key point:  Policymakers appear to be conserving policy ...

China’s producer price deflation softened in January, helped largely by a  global metals rally , though economists warn that a sustained reflation remains elusive without stronger domestic demand. Key Inflation Data (January 2026) Producer Price Index (PPI): -1.4% YoY Smallest decline since July 2024 Improved from -2.1% previously Consumer Price Index (CPI): +0.2% YoY Slowed from +0.8% in December Core CPI: +0.8% (six-month low) Headline improvement masks fragile underlying demand. What’s Driving the PPI Rebound? The improvement was concentrated in  upstream sectors , particularly metals: Non-ferrous metal materials: +16.1% YoY Mining & processing prices: +22.7% The rally in global commodities — especially gold and industrial metals — provided external support. However,  downstream consumer goods prices worsened , with declines widening to  -1.7% , highlighting weak household demand. Morgan Stanley economist  Robin Xing  noted that there is  “no de...

China’s central bank is ramping up liquidity injections to  prevent a cash crunch ahead of the Lunar New Year , as seasonal demand, bond issuance and currency flows threaten to drain funds from the banking system. The  People’s Bank of China  (PBOC) injected  600 billion yuan (US$86.4 billion)  through 14-day reverse repurchase agreements late last week, ending a two-month pause in such operations. Analysts at Industrial Securities estimate total injections could reach  up to 3.5 trillion yuan  before the holidays begin. Bloomberg estimates point to a  liquidity shortfall of about 3.2 trillion yuan (US$456 billion) , driven by: Heavy  holiday cash withdrawals Front-loaded government bond issuance Rising  corporate and exporter demand for yuan To keep funding conditions stable, the PBOC has already  doubled bond purchases in January  and added a  record 1 trillion yuan  of medium- to long-term funds into banks. It also...

Simple Summary China’s key one-year bank funding rate has fallen to a record low PBOC charged some banks as little as 1.5% on policy loans in January Move lowers borrowing costs without headline rate cuts Signals continued, low-key support for economic growth What Happened China’s central bank, the  People’s Bank of China , allowed the interest rate on its  one-year medium-term lending facility (MLF)  to fall to  as low as 1.5% in January , down from  1.55% in December , according to people familiar with the matter. That compares with an  official MLF rate of 2% a year ago , before the PBOC stopped publishing a single benchmark rate. Why This Matters Lower funding costs for banks , encouraging lending Supports an economy facing  deflationary pressure  and a  prolonged property slump Helps stabilise  bank net interest margins , which have been under strain Key point:  This is another example of Beijing’s  “drip-feed” stimulus ap...

The People’s Bank of China (PBOC) set the yuan’s daily reference rate at  7.1161 per dollar  on Monday, its strongest level since November and the biggest upward adjustment since January, after the greenback weakened on  Federal Reserve Chair Jerome Powell’s dovish Jackson Hole remarks . The fixing came in stronger than Friday’s  7.1321 , signaling Beijing’s intent to stabilise the currency even as macro headwinds weigh on growth. Market Reaction Onshore yuan (CNY):  Strengthened 0.1% to  7.1605/USD , its highest since late July. Offshore yuan (CNH):  Also gained, with FX traders interpreting the aggressive fixing as stronger-than-expected, given the modest USD weakness. Bloomberg Dollar Spot Index:  Fell 0.8% following Powell’s speech, reinforcing yuan momentum. However, the yuan still  weakened against a basket of peers , according to Bloomberg’s CNY index, underscoring that the move was primarily  USD-driven rather than a broad-based ...

China’s central bank moved to shore up the yuan on Thursday, setting its daily reference rate well below analyst forecasts after the currency slid to a two-month low against the U.S. dollar. Key Points: Stronger Fixing:  The People’s Bank of China (PBOC) set the yuan’s reference rate around  7.15 per dollar , the biggest divergence from market estimates since April. Market Reaction:  The offshore yuan rebounded 0.2% to  7.1993 , after touching its weakest level since early June. Dollar Surge:  The move came as the U.S. dollar hit a two-month high, driven by stronger U.S. trade deals and Fed Chair Jerome Powell’s hawkish comments on interest rates. Regional Moves: Monetary authorities in  Indonesia  and  Hong Kong  also intervened to defend their currencies as the greenback’s rally pressured Asian FX markets. The yuan and Singapore dollar remained relatively resilient compared to other regional peers. Why It Matters: The PBOC is balancing...

China’s credit expansion unexpectedly cooled in November, signaling mounting challenges for the nation’s economic recovery efforts despite government stimulus. Key Numbers and Missed Expectations Aggregate financing  rose by  2.34 trillion yuan , below the median forecast of  2.7 trillion yuan  and the  2.5 trillion yuan  increase seen in November 2023. New loans by financial institutions  totaled just  580 billion yuan , sharply missing the forecast of  995 billion yuan . Loans to the  real economy —excluding financial institutions—fell to their  lowest November level since 2009 , offsetting elevated government bond issuance. Economic Headwinds Despite recent signs of improvement in  consumption  and  factory activity , overall confidence remains fragile. Policies implemented so far have not been sufficient to lift the economy out of deflationary pressures. Corporate mid- and long-term loans , a measure of business i...

China's central bank is expected to implement its most significant interest rate cuts in a decade next year as policymakers work to counter economic headwinds, including weak domestic demand, deflation, and the potential impact of US tariffs under President-elect Donald Trump. Key Projections: Rate Cuts Expected : Goldman Sachs and Morgan Stanley predict a 40-basis-point reduction in the People's Bank of China (PBOC) policy rate in 2025, lowering the seven-day reverse repo rate to 1.1%. Economists’ Views : Some analysts, like Mizuho Securities, forecast even deeper cuts of up to 60 basis points in lending and policy rates. Economic Context: Deflation Concerns : China faces its longest deflation streak this century, keeping real borrowing costs high despite rate cuts. Trade Pressures : A potential resurgence of US-China trade tensions could further strain exporters, compounding economic difficulties. Growth Challenges : The GDP deflator, a broad price measure, remains below zero...

China’s central bank moved to shore up the yuan for the second consecutive day by setting a stronger-than-expected reference rate of 7.1966 per dollar , beating analyst estimates by 359 pips . This follows an even wider gap of 445 pips on Wednesday, the largest since August . The yuan is under pressure as the US dollar reaches a two-year high after Donald Trump’s election victory, fueled by concerns that his administration might impose 60% tariffs on Chinese goods , which would impact Sino-US trade significantly. Previously, the People’s Bank of China (PBOC) had allowed the yuan to weaken alongside other currencies, but more than half of Bloomberg’s survey respondents suggested that Beijing might further devalue the yuan to boost Chinese export competitiveness amidst potential trade barriers. The PBOC’s daily yuan fixing —a tool that controls the onshore yuan’s movement within a 2% range —remains a key measure for managing currency stability. According to Kiyong Seong, Asia macro...

The People’s Bank of China (PBOC) has introduced a new monetary policy tool aimed at better managing liquidity in the financial system as the country faces ongoing economic pressures. This new measure, known as outright reverse repurchase agreements , will be conducted monthly with primary dealers for a duration of no more than one year, according to a PBOC statement on Monday. The move is intended to maintain reasonable liquidity within the banking system and enrich the central bank's toolkit for fine-tuning the economy . Outright repos, a form of short-term borrowing in the money markets, will include sovereign bonds, local government notes, and corporate debt as eligible securities, the PBOC noted. This new tool marks part of the PBOC's policy shift to operate more like global peers, allowing it to influence market borrowing costs more effectively. The central bank has increasingly relied on the seven-day reverse repo as its main policy lever, moving away from the med...

A government-linked think tank in China has proposed the issuance of 2 trillion yuan (US$281 billion) in special government bonds to create a market stabilization fund , according to a report from Chinese media outlet The Paper . The fund would help stabilize markets by buying and selling blue-chip stocks and exchange-traded funds (ETFs) . This recommendation comes from the Institute of Finance & Banking at the Chinese Academy of Social Sciences , a think tank connected to China’s State Council . The initiative is part of a broader stimulus push that began in late September to support equities and the economy. However, detailed plans for the fund have yet to be disclosed. The People’s Bank of China (PBOC) has already introduced several programs, including a specialized re-lending facility to help listed companies and major shareholders buy back shares , and a swap facility to provide liquidity to institutional investors for purchasing stocks. Despite the stimulus measures, C...

Central Huijin Investment Ltd. , a key unit of China's sovereign wealth fund, has set a record for its debt issuances , selling 207 billion yuan ($29 billion) in bonds this year. This marks the largest onshore credit market issuance since the firm first tapped into it in 2010. The latest bond sales include 9 billion yuan in three-year debt securities and 15 billion yuan in five-year bonds , according to sources. Central Huijin has historically stepped in to buy equity during volatile periods to stabilize the stock market , and its holdings of trading assets surged by 388% in the first half of 2024. With China’s stock market rallying by 23% in recent months due to new stimulus measures , Huijin’s actions align with broader efforts to prop up the economy. The People’s Bank of China (PBOC) has also introduced liquidity tools, such as share buybacks and equity swaps , to assist market recovery. State-led buying, as suggested by DBS Bank strategist Wei Liang Chang , could further...

Chinese banks are expected to trim rates on 300 trillion yuan ($42.3 trillion) worth of deposits as early as this week, according to insiders, following recent stimulus measures that have further squeezed their already thin margins. Major banks, including Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp. , are preparing to lower rates under guidance from the People's Bank of China’s (PBOC) interest rate self-disciplinary mechanism. The potential cuts, which have not yet been finalized, may include a 20-basis point reduction on one-year time deposits and a 25-basis point reduction on longer-term deposits . This would mark the second reduction this year, following a previous round in July. The move comes after China rolled out its most significant stimulus package yet to bolster its struggling economy, which included slashing policy rates and reducing borrowing costs on $5.3 trillion of mortgages . The PBOC has already made a historic cut to its...

The People's Bank of China (PBOC) has ramped up its net purchases of sovereign bonds, acquiring a total of 200 billion yuan ($28.5 billion) from dealers in September. This figure surpasses the amount of bonds bought in the previous month and highlights the central bank's commitment to maintaining adequate liquidity in the banking system and reinforcing counter-cyclical monetary policy adjustments . While the PBOC did not specify the tenors of the bonds purchased or the timing of these operations, it has indicated a shift in strategy. Last month, the central bank bought short-tenor government bonds while selling longer-tenor notes, a move aimed at managing liquidity and stabilizing the financial environment. Recent market conditions have been tumultuous, marked by a flurry of stimulus announcements and reports of special sovereign bond issuance, which temporarily halted the bond-buying frenzy. The yield on the benchmark bond surged to 2.26% , the highest level since mid-July, ...

  China is fueling optimism for further economic stimulus after the People's Bank of China (PBOC) cut a key short-term policy rate and announced a rare briefing by top financial regulators. The central bank reduced the 14-day reverse repurchase rate by 10 basis points to 1.85%, signaling the potential for additional monetary easing as authorities work to revive economic growth. The briefing, scheduled for tomorrow, will feature PBOC Governor Pan Gongsheng and two other senior officials discussing financial support for economic development. This comes amid concerns that China may miss its annual growth target of around 5% without further intervention, especially following a string of disappointing economic data in August. The moves have heightened expectations for the PBOC to cut rates further, especially after the US Federal Reserve initiated rate cuts last week. The yield on China’s 10-year government bonds dropped to a fresh low of 2.03%, and the PBOC raised its daily ref...

China’s central bank, the People’s Bank of China (PBOC), has decided to keep its key interest rate unchanged at 2.3% for its one-year medium-term lending facility (MLF), following a 20 basis point cut in July. This move reflects Beijing’s cautious approach to economic support, as it seeks to balance stimulating growth with managing financial risks in the bond market. Key Takeaways: Steady Policy Rate : The PBOC opted to maintain the one-year MLF rate at 2.3%, despite recent economic pressures, including a rare contraction in bank loans due to weak demand. The decision also comes after the PBOC withdrew a net 101 billion yuan ($14 billion) from the banking system this month, signaling an effort to maintain balanced liquidity and prevent excessive enthusiasm in the bond market. Curbing Bond Market Excesses : The PBOC’s decision aligns with its recent warnings against a bond-buying frenzy, as it seeks to mitigate financial risks. China has initiated stress tests with financial institution...

  China maintained its benchmark lending rates unchanged on Tuesday, aligning with market expectations, as shrinking interest margins at lenders curtailed further easing efforts. Key Highlights: Lending Rates Unchanged: The one-year Loan Prime Rate (LPR) remained at 3.35%, and the five-year LPR was kept steady at 3.85%. These rates influence the pricing of most new and outstanding loans, as well as mortgages, respectively. Market Expectations Met: A Reuters survey of 37 market participants had unanimously anticipated that both rates would remain unchanged, indicating a consensus on the current monetary stance. Context: China's decision to hold rates follows a surprise move in July when the People's Bank of China (PBOC) cut major short- and long-term interest rates for the first time in nearly a year, signaling a shift in its monetary policy framework. Despite this, bank lending in China dropped more than expected last month, reaching the lowest level in nearly 15 years due t...

  The People's Bank of China (PBOC) injected 577.7 billion yuan (US$80.9 billion or RM359.1 billion) into the financial system on Thursday through a seven-day reverse bond repurchase agreement at an unchanged rate of 1.7%. This move is part of a broader strategy to maintain liquidity in the banking system and follows recent interest rate reductions that suggest a shift in the central bank's policy framework. Key Highlights: Liquidity Injection: The PBOC’s cash injection through short-term bond instruments is aimed at counteracting maturing medium-term lending facility (MLF) loans, tax payments, and government bond issuance. The goal is to "keep banking system liquidity reasonably ample," according to an official statement. Medium-Term Loan Rollover Delayed: A batch of 401 billion yuan worth of MLF loans was set to expire on Thursday, but the PBOC announced that the rollover will occur on August 26. This delay is part of the central bank’s evolving approach to moneta...

  The offshore yuan surged past China's daily reference rate for the first time since November, signaling a shift in market sentiment as traders exited a once-popular short strategy. This move comes amidst broader global financial market dynamics and concerns over economic conditions in the US. Key Developments Yuan's Performance: The yuan climbed to a high of 7.1125 per dollar , trading at a premium to the People’s Bank of China’s (PBOC) daily fixing. This marks a near erasure of the yuan's losses for the year, reflecting improved market sentiment after recent concerns about China's economic growth had previously pushed the currency to its lowest level since November. Impact of US Economic Data: The rally in the yuan was driven in part by weak US economic data, which has raised fears of a potential recession. As risk appetite soured, traders unwound positions in a popular carry trade strategy, where they borrowed currencies like the yuan and yen at low interest rates t...

  China's bond rally has hit record highs, leading to speculation about the People's Bank of China's (PBOC) next move. Government debt yields have fallen to unprecedented lows, with the 10-year yield at 2.15%. This has been driven by investors seeking safety amidst declining stocks, property prices, and low deposit rates. The PBOC is caught between reducing borrowing costs to stimulate the economy and preventing market instability. Though it hinted at selling bonds to cool the market, it recently opted for interest-rate cuts. Investors remain divided. Some expect the PBOC to act if the rally goes too far, while others believe bond demand will continue due to strong fundamentals. Upcoming political meetings and manufacturing data may provide further guidance on Beijing’s policy direction. Key Takeaways: China’s bond rally pushes the 10-year yield to a historic low of 2.15%. Investors seek safe assets amidst market declines. PBOC balances economic stimulation with market stab...