MNI China Daily Summary: Friday, August 29

POLICY: The Chinese Communist Party's official newspaper has endorsed Chairman Xi Jinping's "Dual Circulation" development model, seeking to present it as a strategic guidance for China's long-term growth. In Friday's overseas edition, the People's Daily said the new slogan is a response to new developments and complex changes in China's internal and external environment, denying that China has been forced to shift toward internal consumption as the main economic driver.

LIQUIDITY: The PBOC injected CNY50 billion via 7-day reverse repos with the rate unchanged at 2.2% on Friday. This resulted in a net drain of CNY100 billion given the maturity of CNY150 billion of reverse repos, according to Wind Information. The operation aims to keep 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 2.2230% from Thursday's close of 2.1532%, Wind Information showed. The overnight repo average decreased to 1.3466% from the previous 1.4515%.

YUAN: The currency strengthened to 6.8651 against the dollar from 6.8794 on Thursday. The PBOC set the dollar-yuan central parity rate lower for a fourth day at 6.8891, the strongest level since January 23, compared with Thursday's 6.8903.

BONDS: The yield on 10-year China Government Bond was last at 3.0675%, up from the close of 3.0600% on Thursday, according to Wind Information.

STOCKS: The Shanghai Composite Index gained 1.60% to 3,403.81, while the CSI300 index rose 2.39% to 4,4844.27. Hang Seng Index gained 0.56% to 25422.06.

FROM THE PRESS:The CFETS RMB Index, measuring the strength of the yuan against a basket of currencies, could see short-term strength as China leads the global recovery and draws in foreign capital, the China Securities Journal said, citing Golden Credit Rating. Near term, the yuan is still impacted by the global pandemic and changing global events, the Journal said.

Regulators should tighten China's real estate market and let home prices return to reasonable levels in the hope that people will spend more on consumer items, the Securities Times said, citing Ni Pengfei, a director at the Research Center for City and Competitiveness at the Chinese Academy of Social Sciences. Higher prices for both land and houses erodes profits of manufacturers, driving them out of expensive sites, Ni said.

Profits at China's major industrial companies rose 19.6% y/y to CNY589.5 billion in July, the third month of annual gains, led by sales of automobiles and electronics, the Economic Information Daily reported. The Daily's report cited data from the National Bureau of Statistics of China, which showed that the July gains came after an increase of 11.5% y/y in June as the economy continued its recovery. Profits at mining and raw material producers, however, face greater cash flow pressure as account receivables rose and profits declined, according to the Bureau.