MNI China Daily Summary: Thursday, Aug 29

MNI (MNI (BEIJING)) - POLICY: Chinese authorities have recently discussed potentially placing tariffs on large engine imported cars, He Yadong, spokesperson for the Ministry of Commerce, said on Thursday.

PBOC: The People’s Bank of China announced Thursday it had today bought special treasuries, restarting purchases of state bonds for the first time in 16 years.  According to a statement on its website, the PBOC conducted an outright purchase operation through a quantity bidding method, buying a total of CNY400 billion special treasury bonds from primary dealers, broken down as CNY300 billion of 10-year maturity and CNY100 billion of 15-year paper

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY150.9 billion via 7-day reverse repos, with the rate unchanged at 1.70%. The operation led to a net drain of CNY208.4 billion after offsetting maturities of CNY359.3 billion, according to Wind Information.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.6310% from 1.7808%, Wind Information showed. The overnight repo average decreased to 1.5136% from 1.5218%.

YUAN: The currency strengthened to 7.1102 against the dollar from 7.1260 on Tuesday. The PBOC set the dollar-yuan central parity rate higher at 7.1299, compared with 7.1216 set on Wednesday.

BONDS: The yield on 10-year China Government Bonds was last at 2.1175%, up from 2.1025% at Wednesday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.50% to 2,823.11 while the CSI300 index fell 0.27% to 3,277.68. The Hang Seng Index increased 0.53% to 17,786.32.

FROM THE PRESS: 

Analysts expect the yuan to strengthen further against the U.S. dollar within the year, supported by exporters’ foreign exchange settlement, with the intensity dependent on an economic improvement, Yicai.com reported. Exporters hold about USD500 billion in deposits of which USD100-200 billion will be settled if the offshore yuan rises above 7.1, the newspaper said, citing estimates from Zhang Meng, forex and interest rate strategist at Barclays. Exporters have accumulated dollars over the past two years given yuan pessimism and are likely to continue holding unless the Federal Reserve starts a substantial rate-cut cycle, the newspaper said, citing analysts.

Authorities will open eight new downtown duty-free shops in cities including Guangzhou, Shenzhen, Chengdu and Tianjin, to boost domestic consumption in the second half, People’s Daily has reported. Additionally, they will transform the country’s existing thirteen existing duty-free shops into downtown outlets. Outbound travellers, including Chinese nationals departing from the Chinese mainland by air or cruise within 60 days can access the stores, the daily noted.

Local governments are seeking new revenue streams by leveraging assets, Caixin.com reported. A Chongqing city fiscal report showed non-tax revenue mainly came from asset disposal, which grew 31.2% y/y in H1, while tax revenue grew by 2.8%. The city faces increasing difficulty in monetising assets and will focus on government-owned housing, land and large equipment, Caixin reported.