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MNI China Daily Summary: Wednesday, July 21

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LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.2% on Wednesday. The operation left liquidity unchanged given it netted off CNY10 billion reverse repos maturing today, 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) increased to 2.2105% from the close of 2.1729% on Tuesday, Wind Information showed. The overnight repo average fell to 2.1719% from the previous 2.1824%.

YUAN: The currency strengthened to 6.4743 against the dollar from 6.4800 on Tuesday. The PBOC set the dollar-yuan central parity rate lower at 6.4835, compared with the 6.4855 set on Tuesday.

BONDS: The yield on the 10-year China Government Bond was last at 2.9480%, down from Tuesday's close of 2.9575%, according to Wind Information.

STOCKS: The Shanghai Composite Index rose 0.73% at 3,562.66, while the CSI300 index increased 0.69% to 5,144.04. Hang Seng Index lost 0.13% to 27,224.58.

FROM THE PRESS: China is likely to continue pushing for lower financing costs in H2, including rates of bank lending and companies' capital raising, even after it left the LPR unchanged on Monday, the 15th month that the benchmarks stayed at 3.85% for 1-year and 4.65% for 5-year, the Economic Information Daily said citing analyst Wang Qing of Golden Credit Rating. The broad cuts to banks' reserve ratios this month increased available capital, which may still lead to lower corporate loan rates later, Wang was cited saying. Policymakers refrained from cutting rate possibly after June's better-than-expected indicators showing manufacturing investment and consumption both improved, the newspaper said citing Wen Bin, chief economist with Minsheng Bank. The rising expectation of rate hikes by the U.S. Federal Reserve also limits the policy room of China, which seeks a more stable yuan, the newspaper cited Wen as saying.

China may increase fiscal spending in the second half to support the slowing economy by utilizing its policy room after expenditure in H1 was the slowest in recent years even as revenue surged 21.8% y/y, reported Cls.cn, a website owned by Shanghai United Media Group. However, debt-funded government investment will be significantly weaker than in the past and new bond sales could slow so to focus on funding high-quality projects, the newspaper said citing analysts.

The soon-to-launch offshore yuan trading market in Shanghai's Pudong district will attract more foreign capital's participation in trading yuan products and boost demand for China's currency and its international acceptance, the Shanghai Securities News reported citing industry analysts. More companies in imports and exports have chosen to use yuan for payment settlement, the newspaper said. Choosing Shanghai as the site of offshore yuan trading strengthens the city as a global financial center, the newspaper said.
MNI London Bureau | +44 203-586-2225 | les.commons@marketnews.com
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