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LIQUIDITY: The People's Bank of China (PBOC) conducted CNY50 billion via 7-day reverse repos with the rate unchanged at 2.2% on Monday. The operation injected net CNY40 billion into the market as there is CNY10 billion reverse repos maturing today, according to Wind Information. The operation aims to keep month-end liquidity stable, the PBOC said on its website.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 2.3298% from 2.3299% on Friday, Wind Information showed. The overnight repo average fell to 1.8231% from the previous 2.0551%.
YUAN: The currency strengthened to 6.4660 against the dollar from 6.4797 on Friday. The PBOC set the dollar-yuan central parity rate lower at 6.4677, compared with the 6.4863 set on Friday, marking the biggest daily drop since Jul 30.
BONDS: The yield on 10-year China Government Bond was last at 2.8480%, down from 2.8685% on Friday, according to Wind Information.
STOCKS: The Shanghai Composite Index gained 0.17% to 3,528.15 while the CSI300 index lost 0.29% to 4,813.27. Hang Seng Index increased 0.52% to 25,539.54.
FROM THE PRESS: China is likely to stick to reform and revitalize the market rather than relying on more liquidity such as cutting interest rates, as the unbalanced recovery from impact of the pandemic has worsened the fundamental issues that the economy faces, Guan Tao, a former forex regulatory official and global chief economic of BOC Securities wrote in an article published on Yicai.com. Liquidity itself cannot force business expansion, more local government investments, or logistical breakdowns, Guan said. China should be on guard for risks of the yuan's sudden correction as other economies pursue easing, as well as surging commodity prices that fan inflation, Guan said.
China will accelerate the issuance of local government special bonds moderately to ensure substantial work at the end of this year and early next year, the 21st Century Business Herald reported citing a report by the Ministry of Finance. Such bond sales may be about CNY500 billion for Sep, CNY700 billion for Dec, and a total of CNY600 billion in Oct and Nov, the newspaper said. Infrastructure investment may be boosted in the following months, though any growth could still be limited by the need of controlling local implicit debt, the newspaper said citing Wu Qiying, an analyst with GF Securities.
China must persist in opening to the outside world despite rising global uncertainties, the official People's Daily said in a commentary. China should steadily expand the institutional opening of its rules and standards, deepen overseas partnerships via Belt and Road initiative, consolidate its supply chains, industrial chains as well as data and talent chains, the newspaper said. The growth of foreign trade reached 24.5% from January to July, registering a 10-year high, which has effectively ensured the balance of international payments and helped stabilized the economy, the newspaper said, though noting that the growth of orders may slow down as the pandemic gradually eases.