MNI China Daily Summary: Thursday, August 10

POLICY: China has expanded the scope of countries where travel operators are allowed to offer outbound tour group vacations, according to the Ministry of Culture and Tourism.

POLICY: China will crack down on local officials failing to honor agreements with the private sector, according to the National Development and Reform Commission (NDRC).

POLICY: U.S. President Joe Biden has signed an executive order to ban certain U.S. investments in China, according to a treasury department announcement.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY5 billion via 7-day reverse repos on Thursday with the rate unchanged at 1.90%. The operation has led to a net injection of CNY2 billion after offsetting the maturity of CNY3 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: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.7309% from 1.7475%, Wind Information showed. The overnight repo average decreased to 1.3310% from the previous 1.5219%.

YUAN: The currency weakened to 7.2072 against the dollar from 7.1989 on Wednesday. The PBOC set the dollar-yuan central parity rate lower at 7.1576, compared with 7.1588 set on Wednesday. The fixing was estimated at 7.2030 by BBG survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.6875%, flat from Wednesday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index closed up 0.31% at 3,254.56, while the CSI300 index increased 0.21% to 3,975.72. The Hang Seng Index was up 0.01% to 19,248.26.

FROM THE PRESS: The U.S.'s recent action to restrict sensitive technology investment in China deviates from the market economy and fair competition principles, according to China’s Ministry of Commerce (MOFCOM). In an online statement, the ministry said China was concerned the actions would disrupt global industrial and supply chain security and reserved the right to take countermeasures. The Global Times said China's industrial development depends less on the U.S. than before, and therefore expects little real impact on Chinese companies. (Source: MOFCOM & Global Times)

China should transform urban investment platforms into ordinary operating state-owned enterprises and form clear boundaries between government and urban investment to prevent new hidden debt from accumulating, according to Yicai. Experts interviewed by the news outlet said, despite the government making strong efforts to prevent hidden debt, local authorities' involvement in activities such as unauthorised borrowing and providing guarantees remained an issue. Local leaders borrowed excessively for political achievements and had implemented the new development concept incorrectly. Auditors recently found cases in Hunan, Gansu and other provinces where new hidden debts had been issued. (Source: Yicai)

Wen Bin, chief economist of China Minsheng Bank, has called the price bottom, as CPI and PPI will likely rebound on a yearly basis. In a commentary, he said the high comparison base over the same period last year had driven the 0.3% y/y decline in July CPI. Pork prices may bottom out with seasonal demand picking up, while international energy prices will likely rebound on increased demand during autumn and winter, he said. Core CPI is expected to gradually return to the historical mean following a series of pro-growth policies, Wen added noting PMI has rebounded for two consecutive months. (Source: 21st Century Business Herald)