MNI China Daily Summary: Tuesday, September 12

INTERVIEW: The Chinese government needs to adopt more aggressive expansionary macroeconomic policies, including more fiscal spending and rate cuts, to bolster demand as factory orders shrink rapidly, while authorities should implement recently announced supply-side policies as soon as possible, a former member of the People's Bank of China's Monetary Policy Committee told MNI.

LIQUIDITY: The People's Bank of China (PBOC) conducted CNY209 billion via 7-day reverse repos on Tuesday, with the rates unchanged at 1.80%. The operation has led to a net injection of CNY195 billion after offsetting the maturity of CNY14 billion reverse repo today, according to Wind Information. The operation aims to keep banking system liquidity reasonable and ample, the PBOC said on its website.

RATES: China's seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.9513% from 1.9997%, Wind Information showed. The overnight repo average decreased to 1.8218% from the previous 1.9000%.

YUAN: The currency strengthened to 7.2835 against the dollar from 7.2906 on Monday. The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1986 on Tuesday, compared with 7.2148 set on Monday. The fixing was estimated at 7.2852 by Bloomberg survey today.

BONDS: The yield on 10-year China Government Bonds was last at 2.6925%, down from 2.6975% at Monday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index edged down 0.18% to 3,137.06 while the CSI300 index fell 0.18% to 3,760.60. The Hang Seng Index was down 0.39% to 18,025.89.

FROM THE PRESS: The People’s Bank of China will likely introduce new and forceful measures to shore up the yuan after it flagged a desire to take action when necessary on Monday, 21st Century Business Herald reported Tuesday citing traders. More wholesale investors have started to reduce CNY short positions and shifted focus to the possibility that the improved Chinese economy would attract overseas capital to enter the A-share market after the PBOC’s monetary supply data in Aug delivered positive signs. However, traders are betting a weaker yuan may not eventuate should the U.S. dollar index remain above 105. The traders note more Asian countries - besides China and Japan - may enhance their currency support if further U.S. Federal Reserve rate hikes boost USD.

China will take effective action to prevent and defuse local government debt risks while balancing economic growth and high-quality development, according to Li Hongzhong, member of the Political Bureau at the CPC Central Committee. Speaking at a special government debt management review meeting, Li said local governments can raise debt to promote Chinese-style modernisation, but ensure relevant systems were in place to strengthen government debt supervision in accordance with the law. (Source: Yicai)

House transaction volume in tier-one cities rebounded after Chinese authorities eased restrictions, according to the China Business Network Tuesday. More than 2,800 second-hand houses were sold in Beijing last weekend, twice the average weekend transaction volume in August, analysts said. They predicted the property market would further recover in Q4 and cities would continue to reduce tax, house-buying fees and relax relevant restrictions on mortgages. But local governments still need to set proper down-payment ratios and mortgage interest rates accordingly to prevent rapid price rises in hot cities, the report said.