MNI China Daily Summary: Monday, Aug 5
EXCLUSIVE: Beijing will likely tilt its support towards consumption in H2 and could issue consumer coupons or other measures that offer subsidies to lower-income households to ensure the economy meets its “around 5%” growth target, advisors and economists told MNI.
POLICY: China’ private Caixin Services PMI reached 52.1 in July, up from 51.2 in June, marking the 19th consecutive month above 50, the index provider said on Monday.
LIQUIDITY: The PBOC conducted CNY0.67 billion via 7-day reverse repo, with rate unchanged at 1.70%. The operation has led to a net drain of CNY300.9 billion after offsetting the CNY301.57 billion maturity today, according to Wind Information.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.6916% from 1.6922%, Wind Information showed. The overnight repo average increased to 1.5695% from 1.5644%.
YUAN: The currency strengthened to 7.1385 against the dollar from previous close of 7.2150. The PBOC set the dollar-yuan central parity rate lower at 7.1345, compared with 7.2150 set on Friday.
BONDS: The yield on 10-year China Government Bonds was last at 2.0500%, up from 2.0350% at the previous close, according to Wind Information.
STOCKS: The Shanghai Composite Index edged down 1.54% to 2,860.70 while the CSI300 decreased 1.21% to 3,343.32. The Hang Seng Index fell 1.46% to 16,698.36.
FROM THE PRESS: China will promote unmanned retail stores, self-collection cabinets, e-sports, social e-commerce and live broadcast e-commerce to boost services consumption, a State Council report has said. Officials proposed 20 tasks based on improving quality and improve consumption. The measures can exploit new growth areas and help provide consumers with a high-quality and personal experience, said Fu Yifu, senior researcher at Xingtu Financial Research Institute. People are focused on hobbies and interests more than before, which supports cultural and tourism consumption, Fu added.
China aims to increase its urbanisation rate to about 70% over the next five years, up from the current 66%, China Times reported, citing the State Council’s recent five-year urbanisation plan. Zheng Bei, deputy director at the National Development and Reform Commission said a 1 percentage point increase in urbanisation can create significant investment demand. The plan proposed improving options for migrant workers to settle in cities and be entitled to public services at residential location instead of Hukou registration.
The yuan will fluctuate between 7.1-7.3 against the U.S. dollar as central bank rate cuts and increased fiscal policy boost domestic demand, and authorities employ currency management tools, Securities Daily reported citing Wen Bin, chief economist at China Minsheng Bank. Developed economies easing cycle and recent yen strengthening has supported the yuan, said Fan Ruoying, researcher at Bank of China Research Institute. The onshore and offshore yuan increased by 0.72% and 1.65% against the dollar in the past two weeks.