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Reporting on key macro data at the time of release.
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EXCLUSIVE: Worsening Sino-U.S. relations and an emerging trend for shorter global supply chains are prompting calls by Beijing policy advisors for closer industrial ties with the country's neighbours, placing plans for an Asia-Pacific free trade bloc firmly at the centre of China's longer-term economic strategies despite diplomatic tensions which could delay a deal, advisors told MNI.
POLICY: China's top decision-making body has urged cadres to implement additional macroeconomic policies in the second half of 2020, including more flexible fiscal measures, according to a statement by Xinhua News Agency following a Politburo meeting on economic tasks chaired by Chairman Xi Jinping on Thursday. The actions should ensure that fiscal measures supported large projects and maintained reasonable growth in monetary supply and financing to the economy, the statement said.
DATA: China's manufacturing Purchasing Manager Index (PMI) rose to a four-month high of 51.1 in July, standing above the breakeven 50 for a fifth month following 50.9 in June. The rise mirrored a continuous recovery in both supply and demand as policies to offset the impact of the epidemic kicked in, according to the latest data from the National Bureau of Statistics released today.
LIQUIDITY: The People's Bank of China (PBOC) injected CNY20 billion via 7-day reverse repos with the rate unchanged. This resulted in a net injection of CNY20 billion as no reverse repos matured 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) rose to 2.2367% from Thursday's close of 2.1829%, Wind Information showed. The overnight repo average increased to 1.8165% from 1.3669% on Thursday.
YUAN: The currency strengthened to 6.9794 against the dollar from Thursday's close of 7.0064. PBOC set the dollar-yuan central parity rate lower for a second day at 6.9848, compared with Thursday's 6.9902.
BONDS: The yield on 10-year China Government Bonds was last at 2.9650%, up from Thursday's close of 2.9325, according to Wind Information.
STOCKS: The Shanghai Composite Index rose 0.71% to 3,310.01, while the CSI300 index gained 0.84% to 4,695.05, as investors fretted over a sharp escalation of tensions between China and the Hong Kong's Hang Seng Index fell 0.47% to 24,595.35.
FROM THE PRESS: China's top decision-making body, the Politburo, stopped short of mentioning cuts to banks' RRRs, interest rates and refinancing in the statement following its Thursday meeting, a departure from the statement following the last meeting in April, the China Business News reported. The statement did, however, continue to emphasize a flexible monetary policy. Should the economy recover well, early-phase stimulus policies may be removed more quickly but they could be ramped up again should the recovery fail to meet expectations, the newspaper said citing Dong Ximiao, a researcher at XWBank.
China is mostly immune from the global downturn caused by the pandemic as only about 5% of its economy is exposed to external turbulence through the trading of goods, the People's Daily reported citing Li Daokui, a former monetary policy advisor to the People's Bank of China. China should continue to tap into its huge and growing middle class and not be distracted by the short-term uncertainties posed by the U.S., Li said according to the Daily. Efforts to boost spending on automobiles, tourism and dining should be made in H2 to help drive sluggish consumption, Li said.
Balancing property prices and the tightening of the funds flow will be the top priorities in H2 as regulators take further steps to prevent asset bubbles and inflationary pressure through restricting illegal funds from moving into the stock and real estate markets, the Economic Information Daily reported. Policies such as boosting housing supplies while continuing to limit asset purchases and credit will be crucial, the Daily said, citing its previous interview with Sheng Songcheng, an advisor to the Shanghai government and a former PBOC official.
China is working with the EU and Japan to save multilateralism, the official English-language China Daily said in a commentary on Friday. Both China and the EU recognized the progress in the bilateral investment agreement negotiations, particularly on the issue of fair competition, and promised to continuously strengthen supervision and accelerate discussions on the remaining issues to complete the negotiations within the year. China and Japan both displayed a keen interest in pushing the signing of RCEP, which will eliminate trade barriers between member countries and promote new labour and supply chains between China and ASEAN, the Daily said.