MNI China Daily Summary: Monday, September 7

EXCLUSIVE: China must accelerate reform of stock market rules on disclosure and corporate oversight if its attempts to boost equity purchases by the country's cash-rich insurance companies are to be successful, sources at state-owned companies and policy advisors told MNI.

POLICY: China and the U.S. must not engage in another cold war and become trapped in conflicts, Chinese Vice Foreign Minister Le Yucheng wrote in an article published in state media, People's Daily, on Monday. The two countries should "restart the dialogue mechanism at all levels and fields as soon as possible" to effectively manage risks and ensure that relations are "not out of control or derailed", Le said.

DATA: Exports accelerated to 9.5% y/y to USD235.26 billion in August, marking the third consecutive monthly rise, data from General Customs showed. Exports declined 2.3% y/y over the first two thirds of the year, narrower than the previous 4.1% y/y slump. Imports dipped further by 2.1% y/y to USD176.33 billion, following last month's 1.4% decline. Imports have fallen 5.2% y/y so far this year, slower than the 5.7% y/y decline reported in Jan-July.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY100 billion via 7-day reverse repos with the rate unchanged. This resulted in a net injection of CNY20 billion given the maturity of CNY80 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 2.1971% from last Friday's close of 2.2057%, Wind Information showed. The overnight repo average increased to 2.0812% from the previous 2.0368%.

YUAN: The currency strengthened to 6.8302 against the dollar from 6.8393 on last Friday. The PBOC set the dollar-yuan central parity rate higher for a second day at 6.8386, compared with Friday's 6.8359.

BONDS: The yield on 10-year China Government Bond was last at 3.1425%, up from the close of 3.1200% on last Friday, according to Wind Information.

STOCKS: The Shanghai Composite Index tumbled 1.87% to 3,292.59, while the CSI300 index lost 2.11% to 4,669.37. Hang Seng Index decreased 0.43% to 24,589.65.

FROM THE PRESS: China's foreign trade should continue its momentum in August as company's back orders cleared and domestic consumption rose, reported Securities Daily citing analysts. Fu Yifu of the Suming Financial Research Institute told the Daily that China continues to explore new growth opportunities with other nations through the Belt and Road Initiative. These included countries with existing free trade agreements with China and others that have the pandemic relatively under control, Fu said. Total foreign trade value in July was CNY 2.93 trillion, up 6.5% y/y.

New loans issued in August could be as high as CNY1.2 trillion with aggregate financing to the economy at CNY2.75 trillion, up from CNY992.7 billion and CNY1.69 trillion in July, the Securities Daily reported citing estimates by analysts. Infrastructure and property investment may have quickened, contributing to more corporate and individual loans, the newspaper said citing Tao Jin, a researcher at the Suning Institute of Finance. Local government bond issuance in August was close to this year's peak in May, increasing the scale of social financing, Tao said. The PBOC is expected to release the loan data some time this week.

China is accelerating the issuance of local government bonds to boost investment with CNY1.2 trillion sold in August, the second highest monthly offering this year, the Shanghai Securities Journal reported. August is suitable for construction, so more funds were invested in shantytown and urban community renewal projects where the economic impact took place immediately, the newspaper said citing Zhang Yiqun, a researcher at the Society of Public Finance of China. Among CNY4.96 trillion in local government bonds issued in the first eight months, about 30% are used for infrastructure projects, the newspaper said.