MNI China Daily Summary: Monday, August 31

EXCLUSIVE: China's economy is set to grow by around 2% in 2020, rebounding from Q1's Covid-19 downturn but disappointing the expectations of only a month ago as the pandemic spreads around the globe, policy advisors told MNI, adding that the recovery may need to continue to be supported by monetary and fiscal stimulus into 2021.

EXCLUSIVE: China needs to accelerate fiscal stimulus to bolster infrastructure spending and boost growth to 2%-2.5% this year following the coronavirus shock, a senior policy advisor and former member of the People's Bank of China monetary policy committee told MNI.

POLICY: China must keep its financial markets steady in the next five years as it accelerates the opening up of its economy, and manages the spillover effects of external easing and pandemic-hit global economy, said the China Finance 40 Forum, a government-endorsed think tank.

POLICY: China's principal banking and insurance regulator has tightened its grip over financial institutions' corporate governance by strengthening the presence of Communist Party leadership in those companies, according to the document published on the regulator's website Friday.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY20 billion via 7-day reverse repos with the rate unchanged at 2.2% on Monday. This resulted in a net drain of CNY80 billion given the maturity of CNY100 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 2.2418% from last Friday's close of 2.2230%, Wind Information showed. The overnight repo average increased to 1.7870% from the previous 1.3466%.

YUAN: The currency strengthened to 6.8535 against the dollar from 6.8651 on last Friday. The PBOC set the dollar-yuan central parity rate lower for a fifth day at 6.8605, the strongest since July 2 2019, compared with last Friday's 6.8891.

BONDS: The yield on 10-year China Government Bond was last at 3.0200%, down from the close of 3.0650% on last Friday, according to Wind Information.

STOCKS: The Shanghai Composite Index lost 0.24% to 3,395.68, while the CSI300 index decreased 0.58% to 4,816.22. Hang Seng Index lost 0.96% to 25177.05.

FROM THE PRESS: Chinese government's fiscal spending will pick up in September, releasing large liquidity into the banking system so the financing costs in September may decline, according to China Securities Journal citing Ming Ming, the chief fix-income analyst with Citic Securities. The PBOC will also inject liquidity to offset the impact of expected large government bond issuances, Ming said according to the journal.

Chinese Chairman Xi Jinping promised several major infrastructure projects and public service facilities for Tibet, including the Sichuan-Tibet Railway, as part of his call for speeding up high-quality development and sustaining poverty alleviation efforts, the China Daily reported. In a speech on Saturday, Xi also called for efforts to ensure national security, peace and stability, stronger border defense and frontier security, the daily said.

China's publicly listed companies should spend more on R&D and initiate new investments as companies displayed resilience under COVID-19, reported the Shanghai Security News on Monday. Combined H1 income of 3,986 public companies fell 2.87% y/y to CNY 23.46 billion, equivalent to half of China's GDP, the newspaper said citing its stats. Capital market rebound has provided optimal financing opportunities and created an innovation-friendly environment, the newspaper reported citing an unidentified industry participant.