CNY News

An index measuring non-manufacturing business activity in China came in at a seasonally adjusted score of 54.6 in December, the latest survey from the China Federation of Logistics and Purchasing revealed on Friday.

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An index measuring non-manufacturing business activity in China posted a seasonally adjusted score of 54.6 in December, the latest survey from the China Federation of Logistics and Purchasing revealed on Friday. The headline figure remains comfortably above the boom-or-bust score of 50 that separates expansion from contraction, although the December reading is down sharply from 56.0 in November. Among the individual components, services business activity came in at 52.5 - down from 54.1.

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China's service sector growth slowed in December to the weakest level since August 2011 as new work inflow weakened, results of a survey by Markit Economics and HSBC showed Monday. The headline services business activity index came in at 50.9 in December, down from 52.5 in November. An index reading above 50 indicates expansion while a reading below 50 suggests contraction.

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Consumer prices in China were up 2.5 percent on year in December, the National Bureau of Statistics said on Thursday - below forecasts for 2.7 percent and slowing from 3.0 percent in November.

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China posted a merchandise trade surplus of $25.64 billion in December, the customs office said on Friday.

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Source : CNBC

China's central bank has provided emergency funding support to commercial banks and will add more cash on Tuesday, as authorities respond to a spike in cash rates ahead of a major holiday, the bank announced on Monday.

The move by the People's Bank of China (PBOC) comes after the interest rate that banks charge each other for short-term loans spiked in recent days.

Bankers and analysts say the PBOC is attempting to strike a balance by guiding interbank interest rates steadily higher to reduce excess credit growth, while avoiding an acute credit crunch that could spark panic and choke off financing to the real economy.

The central bank also appears to be responding to criticism that it failed to communicate effectively with the market during a severe cash crunch that roiled markets in June. Bankers and analysts criticized the PBOC for remaining largely silent as panic gripped the market and rumors swirled about interbank defaults.

"The central bank's operations are just a flexible response to the liquidity situation. They weren't planning to inject funds," China International Capital Corp (CICC) wrote in a note to clients late on Monday.

The PBOC said via its official Twitter-like Weibo micro-blog that it had provided an unspecified amount of funding to the largest banks via its Short-term Lending Facility (SLF).

The central bank also said it will inject further cash into the banking system at regularly scheduled open market operations on Tuesday. The central bank has not injected funds through such operations since December 24.

Indeed, long-time market watchers said it's virtually unprecedented for the central bank to openly declare its intention to inject or withdraw funds at regularly scheduled open market operations. Typically, the market learns of these operations only after they are conducted.

But in an echo of previous statements, the PBOC again urged banks to improve liquidity management. Regulators have also expressed concern about some banks' excessive reliance on short-term funding markets.

Bankers say the central bank is using higher money market rates as a tool to curb explosive growth in economy-wide debt since 2008, especially off-balance sheet credit that banks often fund through interbank borrowing.

In addition to the support for big banks and the planned injection on Tuesday, the central bank will also offer overnight, seven-day, and 14-day funds to smaller banks via SLF, it said in an announcement on its website.

The PBOC will offer up to 120 billion yuan ($19.8 billion) in funds to smaller banks through this channel, according to a central bank document obtained by Reuters.

Analysts say smaller banks rely the most on money-market funding because their smaller branch networks provide them less access to customer deposits.

The sources said banks incorporated at the regional or local level can apply to the PBOC for fund injections via SLF when the interest rate on the overnight bond repurchase rate exceeds 5 percent, the seven-day repo rate exceeds 7 percent, or the 14-day repo rate exceeds 8 percent, according to three sources with direct knowledge of the new policy.

Those thresholds will remain in effect through the Lunar New Year holiday which starts on January 31. After that the expanded SLF mechanism will remain in place for small banks but the thresholds could change, the sources said.

A PBOC spokesman declined to comment.

The central bank previously used its SLF to provide one- to three-month loans to commercial banks. The latest expansion offers cash injections of 14 days or less.

The overnight repo rate closed at 4.30 percent on a weighted-average basis on Monday but individual trades occurred as high as 9 percent.

The seven- and 14-day rates peaked on Monday at 10 percent and 7.8 percent, respectively, according to data from the National Interbank Funding Center.

Traders attributed the higher rates to elevated cash demand in the run-up to the New Year holiday.

The relaunch of initial public offerings of stock is also boosting cash demand this week. IPOs, restarted last week after a 14-month freeze, drive demand for short-term funding as investors need to deposit funds with underwriters in order to subscribe to new listings.

Eight companies said on Monday that they would list on the Shenzhen Stock Exchange on Tuesday, the first listings on China's smaller bourse since the freeze ended.

Traders had previously predicted funding conditions would tighten in late January. The latest funding squeeze follows severe cash crunches in late June and late December.

The seven-day rate peaked at 28 percent on June 20, the highest trade on record, and soared again to 10 percent on December 20 and 23.

An index measuring manufacturing activity in China came in with a score of 49.6 in January, the latest survey from HSBC and Markit Economics revealed on Thursday - hitting a six-month low.

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An index monitoring manufacturing activity in China reflected contraction in January, the latest PMI from HSBC and Markit Economics revealed on Thursday, coming in with a seasonally adjusted score of 49.5.

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Consumer prices in China were up 2.5 percent on year in January, the National Bureau of Statistics said on Friday.

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Foreign direct investment into China increased notably in January despite a slight economic slowdown seen during the final quarter of 2013, figures from the Ministry of Commerce showed Tuesday.

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