MNI China Daily Summary: Tuesday, September 22

POLICY: The People's Bank of China (PBOC) will promote the use of green finance and cooperate with global counterparts in the next five years to prevent systemic financial risks resulting from changes in the environment and climate, officials said on Saturday. The central bank will launch polices under China's 2021-2025 Plan, including optimizing green finance standards, strengthening lenders' green performance evaluation and disclosure and widening current pilot projects, Deputy Governor Chen Yulu said at a meeting of the China Green Finance Committee.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY200 billion via 7-day reverse repos and CNY150 billion via 14-day reverse repos on Tuesday, injecting net CNY350 billion as no reverse repos maturing today, according to Wind Information. The rate for 7-day reverse repos and 14-day reverse repos remained unchanged at 2.2% and 2.35% accordingly.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 2.3634% from Monday's close of 2.3265%, Wind Information showed. The overnight repo average rose to 2.2635% from the previous 2.2457%.

YUAN: The currency weakened to 6.7875 against the dollar from 6.7733 on Monday. The PBOC set the dollar-yuan central parity rate higher at 6.7872, compared with Monday's 6.7595.

BONDS: The yield on 10-year China Government Bond was last at 3.0825%, down from the close of 3.0950% on Monday, according to Wind Information.

STOCKS: The Shanghai Composite Index lost 1.29% to 3274.30, while the CSI300 index decreased 1.19% to 4,635.76. Hang Seng Index dropped 0.98% to 23716.85.

FROM THE PRESS: China's strong economic performance in recent quarters is likely to drive a further appreciation in the yuan, Zhang Bin, a researcher from the Chinese Academy of Social Sciences, an official think tank, wrote in a blog post published by China Finance 40 Forum. Authorities should not intervene in the yuan market as long as the movement is within 15% this year, Zhang said. Pressure from capital inflows can be countered by exchange rate adjustments and some appreciation won't impact the independence of monetary policy, Zhang said. A stronger yuan may have little impact on exports given demand for Chinese products has been strong, Zhang said.

China should raise costs on short-term cross-border capital flows and tighten the regulation of cross-border transactions by financial institutions and firms to prevent destabililzation from speculative capital, said Zhu Min, the former Deputy Managing Director of the IMF, in an interview with People's Daily. Cross-border capital flow are faster and bigger than in the past, given the rising demand for yuan assets, Zhu said.

Chinese business loan rates are likely to further decline in Q4 as regulators press lenders to reduce margins by as much as a total of CNY1.5 trillion this year to support the recovery, the Economic Information Daily reported on Tuesday citing Wen Bin, a researcher from CMBC. The PBOC has meanwhile kept the LPR unchanged for the fifth month, but employed targeted monetary policies such as OMOs and MLFs to maintain liquidity in the banking system, the Daily said. China won't add to its easing policies due to concerns of excess liquidity in the real estate sector, the Daily cited Wang Qing, a macro-analyst from Golden Credit Rating. RRR cuts and MLF adjustments in Q4 are still possible to aid the recovery and help banks ease pressure from the reduction of structured deposits, CMBC's Wen told the Daily.