MNI China Daily Summary: Wednesday, Sep 2

LIQUIDITY: The People's Bank of China (PBOC) injected CNY20 billion via 7-day reverse repos with the rate unchanged at 2.2% on Wednesday. This resulted in a net drain of CNY180 billion given the maturity of CNY200 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) fell to 2.1919% from Tuesday's close of 2.1948%, Wind Information showed. The overnight repo average fell to 2.0732% from the previous 2.1029%.

YUAN: The currency weakened to 6.8261 against the dollar from 6.8239 on Tuesday. The PBOC set the dollar-yuan central parity rate lower for a seventh day at 6.8376, compared with Tuesday's 6.8498.

BONDS: The yield on 10-year China Government Bond was last at 3.1000%, up from the close of 3.0550% on Monday, according to Wind Information.

STOCKS: The Shanghai Composite Index lost 0.17% to 3,404.80, while the CSI300 index edged up 0.04% to 4,843.89. Hang Seng Index gained 0.04% to 4843.89.

FROM THE PRESS: Chinese regulators should scrutinize banks for hiding non-performing loans through creative accounting or repackaging after the pandemic-hit economy led to surges in lenders' bad debt, the PBOC-run Financial News said in a commentary. Regulators should encourage financial institutions to boost capital and provisions to offset NPLs, the newspaper said. Bad debt held by lenders is likely to rise further and may create longer-term risks, as industries such as restaurants and entertainment continue to be hard-hit by the pandemic, according to the commentary.

Many Chinese companies cancelled or postponed bond issuances after tighter liquidity since June pushed up rates by about 1 pp, the 21st Century Business Herald said citing an unidentified bank source. The issuance of 85 corporate bonds, totalling CNY49.8 billion, have been cancelled or postponed in August, bringing this year's failed bond offerings to 511, the newspaper reported.

China should maintain a stable real estate market and prevent potential financial risks, the Economic Information Daily commented on Wednesday. China should ensure the transparency and compliance of real estate financing to prevent highly leveraged expansion while adjusting for domestic demand and land prices, according to the paper. Businesses should expedite collections, limit the pace of buying and steadily reduce their debt ratios, the Daily said.