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China market round-up: Q4 GDP, December data stabilise, PBoC injects liquidity ahead of Lunar New Year, DBS becomes bond settlement agent

By Addison Gong, Rebecca Feng
17 Jan 2020

In this round-up, China’s economy grows at the slowest rate in nearly three decades, the central bank injects a shot of liquidity into the market through the medium-term lending facility and reverse repo, and DBS Bank (China) receives a bond settlement agent licence in the interbank market.


China reported a 6.1% yearly growth in gross domestic product (GDP) on Friday, the lowest on record since 1990. GDP growth steadied at 6% for the last quarter of 2019.

The head of the National Bureau of Statistics, Ning Jizhe, said the 6.1% growth was within the target of 6% to 6.5% China set out to achieve at the start of 2019, and was “considerably higher” than the global growth rate.

A UN report published on Thursday projected a 2.5% global growth rate in 2020.

Economists sought comfort in the fact that China’s growth in the fourth quarter last year, which was in line with consensus forecasts, has showed signs of bottoming out, and that most of the December activity data either improved or stabilised. Infrastructure investment, however, saw continued deceleration in growth to 3.8% from 4%, despite the supportive policies.

“China’s GDP growth has stabilised at [6% year-on-year] in Q4, in line with ours and consensus forecasts,” said emerging market researchers at Barclays on Friday. “In the near term, we expect growth momentum to stay firm in Q1 amid a stabilisation or recovery in domestic demand (as evidenced by expansionary manufacturing PMIs, improved auto sales and resilient housing market) and reduced trade tension.”


The People’s Bank of China extended Rmb300bn ($43.8bn) of loans through its medium-term lending facility into the interbank market on Wednesday. The central bank kept the borrowing cost unchanged.

The goal was to maintain an adequate liquidity level for Lunar New Year next week and to “offset the impact from factors including tax payment and cash demand”, the PBoC said in a statement.

The PBoC also injected Rmb100bn of 14-day reverse repos with an interest rate of 2.65%.


DBS Bank (China) said on Tuesday that it has received a bond settlement agent licence from China. This allows DBS to act as a bond settlement agent in China’s interbank market, a first for a Singaporean bank.

The chief executive of DBS China, Neil Ge, said the bank is looking to “introduce more overseas customers to the China bond market” and work with international institutional investors.


JP Morgan is reportedly seeking full control of its fund management joint venture in China, China International Fund Management Company, in which it currently owns a 51% stake. It is said to be in talks to buy Shanghai International Trust Co’s 49% stake in the JV.

JPM is not the only foreign firm looking to beef up its Mainland business. Its US peer, Goldman Sachs, is reportedly planning to double its headcount in China to 600 as part of a five-year plan. The investment bank is in the midst of trying to secure majority control on its onshore JV, Goldman Sachs Gao Hua Securities.

Additionally, BNP Paribas’s chief executive for China, CG Lai, said in a Wednesday interview on Bloomberg TV that the bank is planning to hire more people on the ground while seeking custodian service and market-making licenses.

Both JP Morgan Asset Management and BNPP declined to comment. Goldman did not respond to a request for comment.


China released more data this week. Exports rose by 7.6% year-on-year in dollar-denominated terms in December. That was a surge compared with a 1.3% drop in November. Imports also grew by 16.3%.

However, exports to the US remained weak, declining by 14.6% year-on-year. That was, however, an improvement from a drop of 23% in December.

“The sluggish growth of exports to the US suggests the adverse impact from the increased US tariffs remains significant,” Ting Lu, chief economist of Nomura, said in a Tuesday note.


China’s total credit growth edged up to 10.69% year-on-year in December, compared with 10.67% in November, according to official data from the PBoC on Thursday.

Growth of renminbi-denominated loans also remained stable at 12.54% year-on-year in December, up marginally from 12.51% in November.

“We think the stabilization in credit growth, accompanied by an expansionary manufacturing PMI, improved exports and imports, and firm auto sales volume, support our outlook of a near-term recovery in growth momentum,” Yingke Zhou, an economist at Barclays, wrote in a Thursday note.

Zhou added that thanks to a combination of factors, including the fact that many local governments have already started to use the approved front-loaded special bonds quota and a decline in corporate onshore bond maturities, there may be more credit growth in the near term.


Home prices in China saw slower growth in December 2019, according to the National Bureau of Statistics.

Of the 70 large to medium sized Chinese cities, new home price in four ‘tier one’ cities — Beijing, Shanghai, Guangzhou and Shenzhen — grew 3.8% year-on-year, but the increase was 1.1 percentage point lower than that in November. The growth moderated to 7.3% for the 31 tier two cities and 6.7% for the 35 tier three cities, which were 0.6 and 0.3 percentage points lower than the previous month.


The total revenues of Chinese central government-owned enterprises reached Rmb30.8tr in 2019, 5.6% higher year-on-year, data from the State-owned Asset Supervision and Administration Commission of the State Council (Sasac) showed on Wednesday. Net profits increased by 10.8% to Rmb1.3tr.

The companies’ total debt-to-asset ratio of 65.1% was 1.1 percentage point lower than the beginning of 2019, according to Sasac.


The Financial Stability and Development Committee (FSDC), housed under the central bank, will set up a mechanism to co-ordinate with local governments, according to a notice on Wednesday.

With the new mechanism, the provincial branches of the central bank will enforce the work of FSDC in their respective jurisdictions. 

By Addison Gong, Rebecca Feng
17 Jan 2020