MNI China Daily Summary: Wednesday, Aug. 12

EXCLUSIVE: China will likely maintain its position of "constrained diplomacy" towards the U.S. following Washington's pending banning of two of China's most popular internet apps, as Beijing has so far found limited ways to retaliate, government sources and advisors told MNI. Describing the dispute as a "corporate issue", Lv Xiang, an expert on the U.S. at the Chinese Academy of Social Sciences, said that the Chinese government does not need to follow suit and adopt similar "irrational measures" to penalize U.S. companies in China.

POLICY: China's Deputy Foreign Minister Le Yucheng said he's ready to speak to his U.S. counterpart at any time to break "radio silence" between two countries diplomatic departments, according to an interview transcript published by China's Ministry of Foreign Affairs. "The next few months are very critical. We must maintain our concentration and not be swayed by various extreme forces," Le said in an interview with Observer Network on Wednesday.

POLICY: China will seek to boost exports by improving port logistics, supporting free-trade zones and E-commerce and improving rail connections with European markets, Ni Yuefeng, the head of the General Administration of Customs told the official People's Daily. China's trade sector continued to grow in July after registering year on year gains in June, and has performed better than the market expected, Ni said.

LIQUIDITY: The People's Bank of China (PBOC) ) injected a net of CNY140 billion via 7-day reverse repos with the rate unchanged at 2.2% on Wednesday as no repos matured today, according to Wind Information. The move aimed to maintain the liquidity in the banking system at a reasonable and ample level, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) slightly increased to 2.2454% from Tuesday's close of 2.2428%, Wind Information showed. The overnight repo average fell to 2.1514% from 2.1838% on Tuesday.

YUAN: The currency strengthened to 6.9458 against the dollar from Tuesday's close of 6.9519. The PBOC set the dollar-yuan central parity rate lower at 6.9597, compared with Tuesday's 6.9711.

BONDS: The yield on 10-year China Government Bonds was last at 2.9550%, flat from Tuesday's close, according to Wind Information.

STOCKS: The Shanghai Composite Index lost 0.63% to 3,319.27, while the CSI300 index decreased 0.73% to 4647.64. The Hong Kong's Hang Seng Index increased 1.42% to 25244.02 as banks and aviation companies led today's surge. Chinese state-owned media Global Times reported that Hong Kong may soon resume transfer flights to the Chinese mainland.

FROM THE PRESS: The PBOC may have purchased China Government Bonds in July as data showed that CGBs held by "other entities" increased by CNY196.5 billion, about 10 times the previous record gain, Ming Ming, the chief fixed-income analyst with Citic Securities, said in a note. This move by the central bank eases market concerns about the increasing supply of government bonds in H2 as the PBOC has marginally tightened its monetary policy toward normalcy, said Ming, a former central bank official. The yield to maturity of 10-year CGBs will approach the lower range of 2.8% to 3%, Ming said.

China will step up effective investment and boost consumption with a focus on urban areas in response to the government strategy of building a more self-reliant domestic economy, according to Economic Information Daily citing Zhang Liqun, an analyst with the Development Research Center of the State Council. The government will boost investment in education, medical care and community services to meet domestic demand, Guan Lixin, a deputy director with Chinese Academy of International Trade and Economic Cooperation, told the Daily.

Chinese President Xi Jinping called on the country to value food, stop wasteful food consumption and not be complacent about food security, state media including Xinhua News Agency reported. In one of the widest campaigns to change people's behaviors since he took power, Xi said Governments must also step up legislation and supervision to stop wasteful behavior. Xi also said the pandemic exposed risks to China's food security and called on the country to strive for self-sufficiency in food production, Xinhua reported.