MNI China Daily Summary: Friday, September 2

POLICY: The People’s Bank of China (PBOC) will continue providing ample liquidity and boost credit expansion via both structural and overall easing tools, Ruan Jianhong, head of the PBOC’s Statistics and Analysis Department, told the China International Financial Annual Forum 2022. The central bank would also increase the flexibility of the yuan exchange rate, Ruan added.

POLICY: China will push for the inclusion of more Hong Kong-listed foreign companies in the cross-border stock connect scheme, in a bid to attract more global companies to list in Hong Kong, Fang Xinghai, vice chairman of the China Securities Regulatory Commission (CSRC) said at a forum. The CSRC will also look to include more companies traded on the Shanghai and Shenzhen exchanges in stock connect, Fang told the China International Finance Annual Forum 2022 in Beijing.

POLICY: China's financial institutions should offer credit support for consumption, Wang Yiming, member of the PBOC monetary policy committee, told the China International Financial Annual Forum 2022, noting that household's bank deposits have surged but companies are reluctant to borrow.

POLICY: Despite global challenges triggered by the energy crisis, China will continue with the green transition of its economy, introducing environmental, social and governance (ESG) principles into financial institutions’ operations, officials and bankers told the China International Financial Annual Forum 2022.

LIQUIDITY: The PBOC injected CNY2 billion via 7-day reverse repos with the rate unchanged at 2.0%. This keeps the liquidity unchanged after offsetting the maturity of CNY2 billion repos 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 1.4314% from 1.4255% on Thursday, Wind Information showed. The overnight repo average fell to 1.1551% from the previous 1.4768%.

YUAN: The currency weakened to 6.9028 against the dollar from 6.8990 on Thursday. The PBOC set the dollar-yuan central parity rate higher at 6.8917, compared with 6.8821 set on Thursday.

BONDS: The yield on 10-year China Government Bond was last at 2.6325%, up from Thursday's close of 2.6225%, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.05% to 3,186.48 while the CSI300 index edged down 0.50% to 4,023.61. Hang Seng Index fell 0.74% to 19,452.09.

FROM THE PRESS: The PBOC aims to increase some friction at the 6.9 level to slow the pace of yuan depreciation against the U.S. dollar, but doesn't want to make too many interventions, Caixin reported citing Zhang Yu, chief macro analyst at Huachuang Securities. The analysts have observed the use of the countercyclical factor for four consecutive days by the PBOC, Caixin noted. The central bank is more concerned about any building expectations of one-way trade, instead of supporting the 7 level, Caixin said citing an unnamed FX trader. The yuan's depreciation trend has begun to show signs of bottoming out after breaking through 6.92 against the dollar on Monday, but holding at 6.9 level in the past four days, Caixin added.

Chengdu in Southwest China, a major city with a population of over 20 million, is the latest to order residents to stay home from 6 pm on Thursday, amid a rising number of Covid-19 infections, Caixin reported. The city will roll out a large nucleic acid testing programme from Sep 1 to 4, with each family arranging for one person with a negative test result within 24 hours to go out once a day for necessities, the newspaper said. It has reported a total of 766 infections since Aug 25, and this round of infections spreading rapidly, the newspaper noted.

Many banks saw a decline in their proportion of housing-related loans and a rise in non-performing loans for both housing developers and home buyers, the 21st Century Business Herald reported Friday, citing semi-annual reports of listed banks. The proportion of lending to developers by the big four state-owned banks -- ICBC, CCB, AgBank, and BOC -- has dropped by 24, 14, 36 and 4 basis points from end-2021, respectively. Among them, the BOC and ICBC reported the highest non-performing rate of 5.67% and 5.47% in real estate loans by end-June, rising 0.62 and 0.68 percentage points from end-2021, the newspaper said. Among the ten banks that announced the non-performing mortgage loans in H1, eight of them saw a rebound of as much as 0.6%, the paper added.