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REALITY CHECK: China's retail sales likely slowed further in July as local outbreaks of Covid-19 cases dampened some traveling and catering expenditure during the summer vacation season, while spending on big-ticket items, especially cars, saw only limited improvement, industry analysts told MNI. "Retail sales may further decelerate to about 11% y/y in July from June's 12.1%," said Wang Jingwen, a senior researcher at the Pangoal Institution.
LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.2% on Friday. The operation left liquidity unchanged given it netted off CNY10 billion reverse repos maturing today, according to Wind Information. The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 2.1860% from the close of 2.1196% on Thursday, Wind Information showed. The overnight repo average rose to 2.1624% from the previous 1.9447%.
YUAN: The currency weakened to 6.4830 against the dollar from 6.4771 on Thursday. The PBOC set the dollar-yuan central parity rate higher at 6.4799, compared with the 6.4754 set on Thursday.
BONDS: The yield on the 10-year China Government Bond was last at 2.9050%, up from Thursday's close of 2.8900%, according to Wind Information.
STOCKS: The Shanghai Composite Index edged down 0.24% to 3,516.30, while the CSI300 lost 0.55% to 4,945.98. The Hong Kong's Hang Seng Index decreased 0.48% to 26,391.62.
FROM THE PRESS: China's new loans and aggregate financing will be supported by accelerated local government bond sales as well as the use of structural monetary tools intended to promote carbon emission cut, support SMEs and high-end manufacturing, the Securities Times said in a front-page commentary, downplaying the weak financial data released this week. Though companies' longer-term loans in July were less than expected and aggregate finance continued to slow, it is too early to say financial demand in the real economy is weakening based on a single month of data, the newspaper said.
China may steer its policies to supporting the economy, including faster issuances of local government bonds and marginally boost liquidity, as the economy faces more headwinds in the second half including slowing exports, Yicai.com reported citing economists. While July's loan data showed less than expected credit growth, it was likely due to seasonal patterns, as historically the first month of a quarter tends to be weak, the newspaper said citing macro strategist Wu Yinzhao of Avic Trust. Monetary policy boost, including a RRR cut or more MLF and OMO operations, may be timed to help the sales of local government special bonds, the news service said.
China should maintain the steady strengthening of the yuan in the longer term to help expand domestic demand and serve its new development model with the domestic market as the mainstay, according to a commentary in the Securities Times. A moderate appreciation of the yuan can reduce the cost of imported intermediate products and lower prices of final products sold in China, thereby increasing consumers' purchasing power, the newspaper said. A stronger yuan may also encourage enterprises to produce higher-quality final products and upgrade domestic consumption, the newspaper said. Japan and Germany witnessed such development during which their appreciating currencies helped reduce the dependence on the international markets, eliminate outmoded production capacities and optimize economic structures, the newspaper added.