MNI China Daily Summary: Monday, July 27

EXCLUSIVE: The People's Bank of China (PBOC) is growing more concerned by the prospect of rising bad loans and a resurgence in shadow banking, but will hold off from any move to tighten policy while the economy continues to recover from the Covid-19 pandemic and could still introduce some additional targeted stimulus, policy advisors and sources told MNI.

LIQUIDITY: The PBOC injected CNY100 billion via 7-day reverse repos with the rate unchanged on Monday, offsetting the maturing CNY100 billion reverse repos and leaving liquidity unchanged, according to Wind Information. The move was to keep the total 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 2.1958% from Friday's close of 2.1025%, Wind Information showed. The overnight repo average increased to 1.9820% from the previous 1.8342%.

YUAN: The currency strengthened to 7.0010 against the dollar from 7.0162 on Friday. The PBOC set the dollar-yuan central parity rate higher at 7.0029, compared with the 6.9938 set on Friday.

BONDS: The yield on 10-year China Government Bond was last at 2.8775%, up from the close of 2.8600% on Friday, according to Wind Information.

STOCKS: The Shanghai Composite Index gained 0.26% to 3,205.23, while the CSI300 index rose 0.51% to 4,528.45. Hang Seng Index fell 0.41% to 24,603.26.

FROM THE PRESS: China's housing regulations are likely to be tightened in H2 and local authorities won't be able to relax the rules like they did in 1H when pandemic stalled growth, the 21st Century Business Herald reported. This signal was given by Vice Premier Han Zheng, who said at a recent meeting on housing that houses are not for speculation and the government would not use real estate as a stimulus, the newspaper said.

Chinese banks are under increasing regulatory pressure to cut structured deposits this year by trillions of yuan, the Shanghai Securities News reported. Authorities are targeting structured deposits because they have pushed up banks' debt-servicing and financing costs, reducing their ability to properly serve the real economy, the newspaper said. Chinese banks' structured deposits plunged in June under sustained supervisory pressure, dropping by about CNY1 trillion in May to a remaining balance of CNY10 trillion at the end of last month, the newspaper said.