MNI China Daily Summary: Tuesday, September 29

EXCLUSIVE: The inclusion of Chinese government bonds in a key index could prompt significant inflows over time, but the effect on the country's capital account should be balanced by increasing foreign portfolio investments made by Chinese financial institutions, a former senior official at the country's foreign exchange administration told MNI.

EXCLUSIVE: China's pledge to achieve carbon neutrality by 2060 is a major boost to the country's green finance market, People's Bank of China Monetary Policy Committee member Ma Jun told MNI, suggesting that authorities should allow foreign investors to securitise environmentally-compliant loans and drive for global harmonisation of green finance standards.

POLICY: China will carefully monitor and assess systems tied to real estate financing, the forex market, the bond market and cross-border transactions, carrying out structured macro-prudential stress tests, People's Bank of China Deputy Governor Pan Gongsheng said Tuesday.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY100 billion via 14-day reverse repos with the rate unchanged at 2.35% on Tuesday. This resulted in a net drain of CNY100 billion given the maturity of CNY200 billion of reverse repos, according to Wind Information. The operation aims to keep liquidity stable at the end of the quarter, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 2.3907% from Monday's close of 2.2536%, Wind Information showed. The overnight repo average rose to 0.9020% from the previous 0.5965%.

YUAN: The currency weakened to 6.8229 against the dollar from 6.8209 on Monday. The PBOC set the dollar-yuan central parity rate lower at 6.8171, compared with Monday's 6.8252.

BONDS: The yield on 10-year China Government Bond was last at 3.1250%, up from the close of 3.1000% on Monday, according to Wind Information.

STOCKS: The Shanghai Composite Index gained 0.21% to 3,224.36, while the CSI300 index increased 0.22% to 4,591.80. Hang Seng Index lost 0.85% to 23275.53.

FROM THE PRESS: Bonds issuance by Chinese local government financing vehicles may increase by the end of the year despite measures tightening credit, and investment companies of regional governments will lead the promotion of urbanization, the Economic Information Daily reported on Tuesday citing Zhai Jin, an analyst from Moody's. The amount of urban investment bonds reached CNY3.2 trillion by the end of September, up 28% y/y, as companies utilized ample liquidity and low-financing costs during March and April to raise funds to invest in infrastructure projects and refinancing, according to Moody's.

China may restrict banks' mortgage assets to less than 30% of their total by applying stricter reviews of loan qualification, size and maturity, reserving most of the quota for first-time buyers and those who intend to live in purchased properties, the Securities Daily reported on Tuesday citing Xu Xiaole, the lead analyst from the Beike Research Institute. The "debt reduction" signal from the authorities in August will place pressure on real estate financing in Q4, as companies boost capital through overseas financing, the Daily reported citing Zhang Dawei, an analyst from Centaline Property. The scale of financing in Q4 was likely to contract and real estate companies could move to promote sales to counter financing pressures, according to Pan Hao, another analyst from the Beike Research Institute.

China won't allow the White House attempt to force Bytedance, the parent company of TikTok, to sell its U.S. operation and is fully prepared to fight resolutely against the move, said Global Times, a tabloid under the Communist Party's official newspaper People's Daily. In an editorial, the Times said the U.S. was "shamelessly" stealing a Chinese company, and China's resistance was significant for the safeguarding of the rights of companies in all countries.