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EXCLUSIVE: China is likely to be "highly flexible" in its macroeconomic policy in the face of a pandemic flare up, but authorities will be cautious about further major monetary or fiscal stimulus while growth remains at acceptable levels, a high-ranking advisor to the central government told MNI. While the appearance of new Covid-19 variants and fresh outbreaks in several provinces contributed to a worse-than-expected economic performance in July and have complicated policymaking, officials are determined to maintain their focus on developing a socially equitable, high-quality economy, Tang Min, counsellor at the State Council, said in an interview.
LPR: China's central bank on Friday left its benchmark rate for loans unchanged for the 16th straight month, according to a statement on the People's Bank of China website. The Loan Prime Rate, guiding companies' cost of borrowing, remains at 3.85% for the one-year maturity and 4.65% for five years. Market participants watch the LPR for any indications the PBOC would lower interest rates.
LIQUIDITY: The PBOC injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.2%. 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 2.0857% from the close of 2.0570% on Thursday, Wind Information showed. The overnight repo average rose to 2.0499% from the previous 1.8443%.
YUAN: The currency weakened to 6.5000 against the dollar from 6.4929 on Thursday. The PBOC set the dollar-yuan central parity rate higher at 6.4984, compared with the 6.4853 set on Thursday, marking the weakest fixing since Apr 21.
BONDS: The yield on the 10-year China Government Bond was last at 2.8475%, up from Thursday's close of 2.8350%, according to Wind Information.
STOCKS: The Shanghai Composite Index fell 1.10% to 3,427.33, while the CSI300 lost 1.91% to 4,769.27. The Hong Kong's Hang Seng Index tumbled 1.84% to 24,849.72.
FROM THE PRESS: China's central bank is expected to further cut banks' reserve requirement ratios in line with the "cross-cycle adjustment" policies that lean toward loosening and also to ensure the market's rising liquidity needs are met, the China Securities Journal reported citing the consensus of several analysts. There is a CNY2.45 trillion total of MLFs maturing in Q4 that may need to be renewed, the newspaper said citing analyst Zhou Yue of Zhongti Securities. Cutting RRRs is also in line with the government's push to promote low-carbon and emission-reduction initiatives, as the PBOC also signalled it would provide low-cost capital to qualified financial institutions, the newspaper said. However, the market doesn't expect this month's LPR, to be announced today, to change nor that the PBOC would lower interest rates as the economy hasn't significantly slowed, the newspaper said.
China Evergrande Group, the country's most indebted developer, said it will ensure its property project construction and delivery, resolve debt risks and maintain the market and financial stability, the 21st Century Business Herald reported citing the company after its executives were summoned by banking regulators in an unprecedented meeting. The developer has been selling its assets including in electric vehicles and the Internet, while two buyers are taking interest in its subsidiary Shengjing Bank, the newspaper said. Concern over the developer's financial health intensified in June when it failed to pay some commercial paper on time.
The China-Australia trade bubble may burst with iron ore prices returning to a more regular range and as China curbs its steel production to reduce carbon emissions, the Global Times said in an editorial. Demand for iron ore has also slowed with unprecedented rains across the country and the pandemic disrupted some production, the newspaper said. The iron ore trade may shift to a buyer's market as China, the world's largest iron ore consumer, pushes ahead with carbon neutrality targets, the newspaper said. China's total imports from Australia rose 37.4% y/y in the first seven months even as China tried to limit imports due to deteriorating bilateral relations.