MNI China Daily Summary: Monday, July 22

EXCLUSIVE: China’s consumption and importation of crude oil will slow to low single-digit percentage growth in 2024 from 2023's 11.5% y/y increase as base effects fade and uptake of electric vehicles increases, a leading Chinese energy expert has told MNI, noting industrial demand will remain robust.

POLICY: The People’s Bank of China said it would cut the 7-day reverse repo rate by 10 basis points to boost the economy, according to a statement on the central bank’s website.

POLICY: China's Loan Prime Rate was cut by 10bp according to a PBOC statement, following the central bank's unexpected move to reduce the 7-day reverse repo rate by 10 basis points.

POLICY: The PBOC has cut the Standing Lending Facilities interest rate by 10 basis points, according to a statement on its website.

LIQUIDITY: The PBOC conducted CNY58.2 billion via 7-day reverse repo, with the rate cut to 1.70% from the previous1.80%. The operation led to a net drain of CNY70.8 billion after offsetting CNY129 billion in maturities, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.7184% from 1.8682%, Wind Information showed. The overnight repo average decreased to 1.6634% from 1.8646%.

YUAN: The currency weakened to 7.2737 against the dollar from previous close of 7.2672. The PBOC set the dollar-yuan central parity rate higher at 7.1335, compared with 7.1315 on Friday.

BONDS: The yield on 10-year China Government Bonds was last at 2.1600%, down from 2.1950% at the previous close, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.61% to 2,964.22, while the CSI300 decreased 0.68% to 3,514.92. The Hang Seng Index rose 1.25% to 17,635.88.

FROM THE PRESS: First-tier cities will further relax housing policies to boost demand following the Third Plenum’s decision to “give cities full autonomy in regulating the real-estate market and reducing home purchase restrictions,” the Paper reported, citing analysts. The government will retain adherence to the "housing for living, not for speculation" concept, and reform developer financing and the pre-sale system to make housing more accessible to consumers, said Chen Jie, professor at Shanghai Jiao Tong University. The authorities' decision to abolish classification standards between ordinary and luxury residential buildings will help reduce taxes and fees, boosting demand for upgrades, said Wang Yeqiang, researcher at the Chinese Academy of Social Sciences.

The PBOC’s decision to cut the 7-day reverse repurchase rate by 10 basis points aims to support the real economy without promoting a further decline in long-term bond yields, persons close to the PBOC have told the Securities Times. Authoritative experts said the real economy will gradually benefit from lower policy rates, reducing financing costs and breaking the negative cycle between falling long-term bond yields and weakening economic expectations. The PBOC’s move increases countercyclical regulation, while medium- and long-end bond yields reflect long-term trends, the experts added.

China has expanded the scope of ultra-long-term special treasury bonds to promote equipment upgrades and trade-in of consumer goods to further boost consumption, Shanghai Securities News has reported following a State Council executive meeting. Consumption will remain the largest contributor and driving force for economic growth, said Lian Ping, chairman at the China Chief Economist Forum. Central and local governments should increase subsidies for the trade-in of durable consumer goods, and cooperate with banks to boost consumer loans, said Wang Qing, analyst at Golden Credit Rating.