MNI China Daily Summary: Friday, July 26

POLICY: Foreign firms are content with China's business environment, according to a survey conducted by the China Council for the Promotion of International Trade (CCPIT), which reported 90% respondents were satisfied in seven out of 10 indicators.

LIQUIDITY: The PBOC conducted CNY358.05 billion via 7-day reverse repo, with rate unchanged at 1.70%. The operation has led to a net injection of CNY299.05 billion after offsetting the CNY59 billion maturity today, according to Wind Information.

RATES: China's seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.9197% from 1.9168%, Wind Information showed. The overnight repo average decreased to 1.6995% from 1.7693%.

YUAN: The currency weakened to 7.2536 against the dollar from 7.2203 on Thursday. The PBOC set the dollar-yuan central parity rate lower at 7.1270, compared with 7.1321 set on Thursday.

BONDS: The yield on 10-year China Government Bonds was last at 2.1075%, down from 2.1250% at Thursday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.14% to 2,890.90 while the CSI300 index rose 0.29% to 3,409.29. The Hang Seng Index was increased 0.10% to 17,021.31.

FROM THE PRESS: Commercial banks will likely cut deposit rates, following major state-owned bank reductions, according to Wang Qing, chief macro analyst at Golden Credit Rating. Rates may continue to decline until the real-estate industry stabilises, Wang added. Six major state-owned banks lowered one year or less deposit rates by 10 basis points, and 2 to 5 year rates by 20bp on Thursday. Banks will benefit from eased pressure on net interest margins and improve profitability, said Ming Ming, chief economist at CITIC Securities, noting the cuts create room for lower lending rates.

Authorities will promote the steady decentralisation of consumption-tax collection to local governments, and optimise the sharing ratio of other taxes between central and local levels, said Lan Fo'an, chief of China's finance ministry. Speaking at a Third Plenary study session, Lan said authorities will reasonably expand the scope of support for special bonds, and increase the proportion of central government fiscal expenditure. (Source: Peoples Daily)

The People’s Bank of China has prioritised stabilising growth by cutting interest rates, which will boost market confidence and clarify future monetary-policy regulation, the PBOC-run Financial News reported, citing analysts. The central bank's latest unscheduled medium-term lending facility (MLF) issuance of CNY200 billion, plus the recent expansion of afternoon open market operation tools, shows the bank’s support for the economic rebound, the newspaper said. The PBOC made the recent MLF injection at a 20 basis point cut after the LPR quotation to signal the reduced importance of the MLF as a policy rate, the newspaper said citing analysts.