MNI China Daily Summary: Monday, September 14

POLICY: China should push forward the international use of the yuan amid the growing politicization of trade and economics and reduce its dependence on the dollar-dominated global payment infrastructure, said Zhang Xiaohui, a senior fellow at the China Finance 40 Forum, a prominent think tank in China.

POLICY: China should seek the urgent protection of its overseas investments amid growing forces of deglobalisation and protectionism, and include these measures in its 2020-2035 modernisation strategies, said Xiao Gang, a senior fellow at China Finance 40 and former chairman of the China Securities Regulatory Commission.

POLICY: China should wait after November's U.S. presidential election to address its relationship with Washington, a former advisor to the Beijing government said Friday, adding that officials should also look to strengthen relations with European and other Asian countries to help address global governance challenges in the post-Covid era.

LIQUIDITY: The People's Bank of China (PBOC) injected CNY80 billion via 7-day reverse repos with the rate unchanged at 2.2%. This resulted in a net drain of CNY20 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) fell to 2.0856% from last Friday's close of 2.0912%, Wind Information showed. The overnight repo average increased to 1.5908% from the previous 1.4579%.

YUAN: The currency weakened to 6.8235 against the dollar from 6.8227 on last Friday. The PBOC set the dollar-yuan central parity rate lower at 6.8361, compared with Friday's 6.8389.

BONDS: The yield on 10-year China Government Bond was last at 3.1350%, down from the close of 3.1400% on last Friday, according to Wind Information.

STOCKS: The Shanghai Composite Index gained 0.57% to 3,278.81, while the CSI300 index rose 0.51% to 4,651.05. Hang Seng Index increased 0.56% to 24,640.28.

FROM THE PRESS: The Yuan exchange rate will likely maintain a steady two-way movement under the influence of multiple factors, reported the Securities Daily citing Xu Gao, the head economist from BOC International. As the dollar index reaches a "phasic bottom", China's fast economic recovery and tighter monetary policies provide a boost for the strengthening of the yuan, Xu said. A stronger yuan, however, pressures exports in turn, and the strength of other currencies such as the euro will also help limit the yuan's gains, Xu told the Daily.

China's domestic consumption should return to growth as sales of automobiles rise sharply, infrastructure projects accelerate and industrial production increases, reported the Economic Information Daily on Monday. Retail sales for August are estimated to have risen by 1.0% y/y due to surging sales of automobiles and increasing online purchases, the Daily said citing analysts. Infrastructure investment for the first eight months may also reverse falls to grow 0.8% y/y, driven by funding from local government special bond sales and a resumption in construction activities after stoppages due to summer heat and flooding, the Daily said citing researcher Li Tao of China Securities. August industrial output may have gained 6.5% y/y, compared to July's 4.8%, analysts told the newspaper. The statistics authority is set to publish the August data on Tuesday.

China should roll out more measures to arrest falling incomes and ensure low consumption doesn't drag down the recovery, the Securities Times reported citing analysts. One-off consumption subsidies to low and middle-income groups in the form of cash or vouchers nationwide is necessary, the Daily said citing Guan Li, director of the Survey and Research Center for China Household Finance, whose research in May predicted a 17.3% reduction in spending this year. More measures to fund private and small companies to retain employment, improve social security and encourage online spending are also needed, the newspaper said.