MNI China Daily Summary: Friday, August 4

POLICY: The Peoples’ Bank of China (PBOC) will ensure counter cyclical adjustments find balance between growth and risk, according to Zou Lan, director-general of the monetary policy department at the central bank. Speaking at a press conference, Zou said the PBOC will coordinate RRR cuts, open market operations, medium-term lending facilities and various structural monetary-policy tools in future to provide reasonable and sufficient liquidity in the banking system.

POLICY: China will no longer impose antidumping duties on imported barley from Australia in view of changing circumstances in China’s barley market, the Ministry of Commerce said. In place since April 2020, the antidumping measures had been under review following an application from the China Liquor Association made in April this year.

POLICY: China saw price increases in 39 out of 50 key production inputs over the mid-June to late July period, according to the National Bureau of Statistics . The economy experienced price decreases in seven inputs with four remaining flat. Buyers saw prices rises in key inputs such as steel rebar (1.8%), copper (0.3%) and coking coal (6.9%), which were partially offset by falls in prices for Liquefied natural gas (-3.3%).

LIQUIDITY: The PBOC conducted CNY2 billion via 7-day reverse repos with the rate unchanged at 1.90%. The operation has led to a net drain of CNY63 billion after offsetting the maturity of CNY65 billion reverse repo today, according to Wind Information. The operation aims to keep banking system liquidity reasonable and ample, the PBOC said on its website.

RATES: China's seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.6402% from 1.6182%, Wind Information showed. The overnight repo average rose to 1.1456% from the previous 1.0729%.

YUAN: The currency strengthened to 7.1802 against the dollar from 7.1895 on Thursday. The PBOC set the dollar-yuan central parity rate lower at 7.1418, compared with 7.1495 set on Thursday. The fixing was estimated at 7.1797 by BBG survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.6880%, up from 2.6875% at Thursday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.23% to 3,288.08 while the CSI300 index rose 0.39% to 4,020.58. The Hang Seng Index was up 0.61% to 19,539.46.

FROM THE PRESS: The PBOC will strengthen coordination between financial, fiscal and industrial policies, and will guide more financial resources into the private economy, said PBOC Governor Pan Gongsheng at a symposium with heads of private enterprises and financial institutions on Thursday. Pan said the scale of instruments to support private enterprises in debt financing will be expanded. Pan also pledged to precisely implement differentiated housing credit policies and meet the reasonable financing needs of private developers. (Source: PBOC website)

China will likely cut interest rates and increase sales of central government bonds in H2 to boost the economy, but it must remain vigilant against breaching risk regulatory principles and the legal framework, said Xiaojing Zhang, dean at the Institute of Economics of the Chinese Academy of Social Sciences. There is a great chance for rate cuts, including adjustments to rates of outstanding loans, said Zhang. Central government bond issuance can help repair the balance sheets of enterprises, residents and local governments, but such debt expansion and the arrangement of uses need to go through legal procedures, said Zhang. (Source: 21st Century Business Herald)

China Securities Depository and Clearing (CSDC) plans to reduce the minimum settlement reserve fund payment ratio for stock-related businesses further to an average of about 13% from the 16% noted since October 2023. This could release over CNY30 billion funds to the market. It will encourage faster completion of fund settlements, further improve the efficiency of fund use by securities companies and fund managers, reduce market costs, and boost confidence. (Source: Quanshang China)