MNI China Daily Summary: Tuesday, August 6

POLICY: The Chinese economy is likely to grow by 4.5-5% in 2025, following 5% growth this year, former vice minister of finance Zhu Guangyao.

POLICY: China aluminum prices will remain range bound in August as supply continues to exceed demand during the traditional off-season, a note from Shanghai Metals Market said.

POLICY: Lithium carbonate prices in China are expected to remain weak in the short term due to poor demand, Mysteel, a Shanghai based commodity research firm said in a note on Tuesday wriiten after a 4.2% price drop last week.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY0.62 billion via 7-day reverse repo, with rate unchanged at 1.70%. The operation has led to a net drain of CNY215.65 billion after offsetting the CNY216.27 billion maturity today, according to Wind Information.

RATES: China's seven-day weighted average interbank repo rate for depository institutions (DR007) increased to 1.6932% from 1.6916%, Wind Information showed. The overnight repo average increased to 1.5817% from the previous 1.5695%.

YUAN: The currency weakened to 7.1469 from 7.1385 against the dollar from Monday. The PBOC set the dollar-yuan central parity rate lower at 7.1318, compared with 7.1345 set on Monday.

BONDS: The yield on 10-year China Government Bonds was last at 2.0350% down from 2.0450% at Monday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index edged up 0.23% to 2,867.28 while the CSI300 index fell 0.01% to 3,342.98. The Hang Seng Index decreased 0.31% 16,647.34.

FROM THE PRESS: China’s consumer prices are expected to have increased 0.2% y/y in July, as high temperatures tightened food supply and raised inflation, according to Wu Chaoming, deputy director at Caixin Research Institute. Stronger tourism and services demand and a reduction in pork supply will support CPI, Wu added. Authorities should boost demand using transfer payments to low-income groups and issue consumer vouchers to address weak inflation, said Mingming, chief economist at CITIC Securities.

The People’s Bank of China will use re-lending and re-discount tools to encourage financial institutions to issue special financial bonds to promote the revitalisation of rural areas, a document released by the PBOC and four other departments said. The measures will also support agricultural-related enterprises to issue financing instruments, and increase coordination among government, banks and enterprises to improve financing services, the statement said.

The PBOC will likely increase liquidity injections later in August to offset maturing medium-term lending facilities and meet accelerated government bond sale demand, China Securities Journal reported, citing analysts. Government bond net issuance will reach a yearly high of CNY1.6-1.8 trillion this month, according to analysts from Huaxi Securities. The PBOC should deal with the large amount of maturing MLF funds this year by increasing MLF injections or cutting the reserve requirement ratio to release medium- and long-term liquidity, the Journal said.