MNI China Daily Summary: Tuesday, August 1

EXCLUSIVE: China is likely to ease restrictions on property purchases to unlock demand from buyers of first homes and from people looking to upgrade following a call from the Politburo to revive the sector, a policy advisor told MNI, noting that such a move would bolster the finances of local governments under growing pressure from debt maturities.

DATA: China's Caixin manufacturing PMI dropped 1.3 points to register 49.2 in July from June, falling into the contraction zone below the breakeven 50 mark again after two months of expansion, due to sluggish demand, the financial publisher said. The new orders and production sub-indices recorded new lows since January and February, respectively, as weak demand, especially external demand, weigh on production.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY8 billion via 7-day reverse repos with the rate unchanged at 1.90%. The operation has led to a net drain of CNY36 billion after offsetting the maturity of CNY44 billion reverse repo today, according to Wind Information. The operation aims to keep month-end liquidity stable, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) decreased to 1.7854% from 1.9819%, Wind Information showed. The overnight repo average fell to 1.5524% from 1.8798%.

YUAN: The currency weakened to 7.1663 against the dollar from 7.1465 on Monday. The PBOC set the dollar-yuan central parity rate lower at 7.1283, compared with 7.1305 set on Monday. The fixing was estimated at 7.1463 by BBG survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.7000%, down from Monday's close of 2.7050%, according to Wind Information.

STOCKS: The Shanghai Composite Index closed nearly flat at 3,290.95, while the CSI300 fell 0.41% to 3,998.00. The Hang Seng Index edged down 0.34% to 20,011.12.

FROM THE PRESS: The National Development and Reform Commission issued measures to restore and expand consumption in the automobile, real estate and services sector. Local governments are not allowed to add new restrictions on car purchases but can lower the threshold according to local conditions. Local authorities should support the replacement of home appliances, spending on wearable devices and smart products. Extending the operating hours of restaurants and increasing the supply of entertainment, such as art festivals and sports events, are also included. (Source: 21st Century Business Herald)

China will introduce new counter-cyclical policies accordingly to promote the continuous recovery of the economy, said the State Council executive meeting on Monday. It is necessary to adjust housing policies and introduce city-specified measures conducive to the stable, and healthy development of the real-estate market. Efforts should also be made to stimulate private investment, activate capital markets, create new pillar industries and boost employment, the council said. (Source: Xinhua News Agency)

Analysts expect China’s PMI index to increase in August and September following announcements by policymakers aimed at revitalising the economy, according to analysts interviewed by 21st Century Herald. According to Wu Chaoming, vice president at the Caixin Research Institute, July’s PMI data was negatively impacted from seasonal factors such as high temperatures and the traditional off-season for industrial production. Wen Tao, an analyst at the China Logistics Information Center, noted factories suffered from a slower economic activity due to July’s high temperatures and rain affecting operations and mobility. (Source: 21st Century Herald)