MNI China Daily Summary: Monday, September 11

POLICY: The People’s Bank of China pledged to ensure the stability of the yuan exchange rate as the currency slumped to its weakest level since 2007 against the U.S dollar. According to a statement following a meeting held by the National Foreign Exchange Market Self-regulation Mechanism published on the Bank’s website on Monday, the financial regulator “has the ability, confidence, and conditions to maintain the basic stability of the yuan exchange rate”, and the PBOC will “take action when necessary” to correct any one-way and pro-cyclical transactions and “firmly guard against the risk of exchange-rate overshot.”

DATA: China’s aggregate finance jumped in Aug from the previous month as new loans and government bonds issue rose, with M2 continuing to decelerate and shadow banking data surging, the People's Bank of China data showed Monday. New loans grew CNY1.36 trillion from CNY345.9 billion in July, beating the CNY1.1 trillion expectation. Total social financing grew by CNY3.12 trillion, compared with CNY528.2 billion in July, also higher than the market consensus of CNY2.6 trillion. The outstanding TSF rose by 9% in Aug from the 8.9% growth registered in July.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY215 billion via 7-day reverse repos on Monday, with the rates unchanged at 1.80%. The operation has led to a net injection of CNY203 billion after offsetting the maturity of CNY12 billion reverse repo today, according to Wind Information. The operation aims to keep banking system liquidity reasonable and ample, the PBOC said on its website.

RATES: China's seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.9997% from 1.8625%, Wind Information showed. The overnight repo average increased to 1.9004% from the previous 1.8996%.

YUAN: The currency strengthened to 7.2906 against the dollar from 7.3415 on Friday. The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.2148 on Monday, compared with 7.2150 set on Friday. The fixing was estimated at 7.3391 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.6975%, down from 2.7050% at Friday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.84% to 3,142.78 while the CSI300 index rose 0.74% to 3,767.54. The Hang Seng Index was down 0.58% to 18,096.45.

FROM THE PRESS: Guangzhou has become the first tier-one city in China to offer first time mortgage rates below LPR, according to 21st Century Herald. The paper said first time buyers can now access mortgages at LPR -10bp at the lower limit. Policymakers said the measures will take effect from September 8, and although down payments for first-time buyers remained at 30%, the minimum down-payment ratio for purchasing a second home will reduce to 40%, which exceeds market expectations. Zheng Dayuan, general manager at Guangzhou Dayuan Mortgage, told the news outlet other tier-one cities will watch Guangzhou's measures closely before deciding to replicate it.

The National Development and Reform Commission has released a list of 5,000 projects authorities recommend for private-sector investment, according to Securities Times. The central state planner said the projects total CNY5.27 trillion of investments and cover urban construction, ports and agriculture. The NDRC will promote relevant projects next and ensure appropriate guarantees are in place to fully mobilise the private sector.

Chinese consumer prices rose 0.1% in Aug following July's 0.2% decrease, as recent efforts to boost demand began to show results, according to Yicai. The news outlet said price changes returned to above zero due to the economy entering peak summer consumption and increases in pork prices. Dong Lijuan, chief statistician of the National Bureau of Statistics, stated pork prices increased 11.4% m/m due to extreme weather, with farmers suppressing sales and the central reserve supporting market confidence. Factory prices showed a narrowing of declines from the previous month, with the PPI index decreasing 3.0% in Aug y/y, but an increase of 0.2% m/m.