MNI China Daily Summary: Wednesday, September 29

EXCLUSIVE: China may soon extend a pilot property tax to more cities despite fears over a weakening real estate market, targeting high-income centres such as Shenzhen as authorities cap speculation and excessive borrowing in line with President Xi Jinping's drive to reduce inequality, policy advisors told MNI.

LIQUIDITY: China's interbank market saw tighter liquidity conditions into the quarter-end, although the latest round of injections from the People's Bank of China just about managed to keep conditions balanced, according to the latest MNI Liquidity Conditions Index, but concerns over the economy and financial risks exposed by the recent Evergrande default linger. The Liquidity Condition Index jumped to 79.6 in September from August's 32.7, with nearly 60% of respondents reporting tighter condition towards quarter end. The reading, close to the levels seen last September, marked a fourth consecutive monthly rise from June.

LIQUIDITY: The PBOC injected CNY100 billion via 14-day reverse repos with the rate unchanged at 2.35% on Wednesday. The operations lead to a net injection of CNY40 billion after offsetting the maturity of CNY60 billion reverse repos today, according to Wind Information. The operation aims to keep liquidity stable by the end of the quarter, the PBOC said on its website.

RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 2.5459% from the close of 2.1889% on Thursday, Wind Information showed. The overnight repo average fell to 1.4848% from the previous 1.9107%.

YUAN: The currency weakened to 6.4680 against the dollar from 6.4608 before the three-day holiday. The PBOC set the dollar-yuan central parity rate higher at 6.4662, compared with the 6.4608 set on Tuesday.

BONDS: The yield on the 10-year China Government Bond was last at 2.8600%, down from Thursday's close of 2.8750%, according to Wind Information.

STOCKS: The Shanghai Composite Index tumbled 1.83% at 3,536.29, while the CSI300 index fell 1.02% to 4,833.93. Hang Seng Index gained 0.67% to 24,663.50.

FROM THE PRESS: China's central bank is shifting its monetary policies to prevent a further slowdown as the authorities recognize that the real economy is faltering and growth drivers weaken in H2, Yicai.com reported citing analysts including Citic Securities Ming Ming, who is a former central bank official. The PBOC is likely to ensure the growth of M2 and social supplies meet the nominal GDP growth needs, and will continue to support small businesses, employment and consumption, Yicai said citing analyst Zhou Maohua of Everbright Bank. The economy faces greater pressure characterized by a lack of infrastructure investments, persistently high commodity prices, logistical bottlenecks and shortage of parts, property curbs, electricity shortages and the global pandemic, Zhou was cited saying.

China is likely to gradually relax the current tight financing environment for the real estate sector, focusing on meeting the loan demand of developers and first-time homebuyers and increasing financial support for the housing rental market, wrote Yin Zhongli, director of the Real Estate Finance Research Center of the Chinese Academy of Social Sciences in an article published by 21st Century Business Herald. In an unusual move, the central bank emphasized the healthy development of the property market and safeguarding the legitimate rights of home consumers in its Q3 MPC meeting, hinting a relaxation, said Yin. The release of mortgage loans may be sped up as the PBOC also proposed to allow some of next year's loan quotas to be used this year to offset the recent decline in credit growth, said Yin. But such relaxation should be carried out through window guidance to banks, so to avoid stoking the real estate market, according to Yin.

China will achieve "large-scale" increase in research and development spending by 2025 and raise the number of top-level scientists as well as achieving self-sufficiency in training domestic talents, President Xi Jinping said at a top-level government forum on talents, according to a readout by Xinhua News Agency. By 2030, the country will install a system that attracts top foreign talents and become a world leader in science and technology, Xi said. The government will strategically support the building of global talent pools, including setting up talent bases in Beijing, Shanghai and Guangdong-Hong Kong region, Xi said.