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POLICY: Lower-than-expected Chinese inflation in July will provide more room for monetary easing to support the economy, analysts said, pointing to the prospect that imported price rises could slacken as the global economy slows.
DATA: China's July consumer price index rose 2.7% y/y, accelerating from June's 2.5% and hitting the highest level since July 2020, though undershooting a 2.9% forecast, data from the National Bureau of Statistics showed. The producer price index measuring factory gate prices eased for the ninth straight month to 4.2% y/y from June's 6.1%, the lowest since February 2021 and beneath the 4.9% forecast.
LIQUIDITY: The People's Bank of China (PBOC) injected CNY2 billion via 7-day reverse repos, with the rate unchanged at 2.1%. This keeps liquidity unchanged after offsetting the maturity of CNY2 billion repos 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) rose to 1.3721 from the close of 1.3278% on Tuesday, Wind Information showed. The overnight repo average increased to 1.0675% from the previous 1.0221%.
YUAN: The currency weakened to 6.7577 against the dollar from 6.7542 on Tuesday. The PBOC set the dollar-yuan central parity rate higher at 6.7612, compared with 6.7584 set on Tuesday.
BONDS: The yield on the 10-year China Government Bond was last at 2.7340%, down from Tuesday's close of 2.7375%, according to Wind Information.
STOCKS: The Shanghai Composite Index edged down 0.54% to 3,230.02, while the CSI300 index lost 1.12% to 4,109.74. The Hang Seng Index tumbled 1.96% to 19,610.84.
FROM THE PRESS: The Chinese yuan will remain resilient in Q3 with no possibility of significant depreciation, wrote Ying Xiwen, senior researcher at China Minsheng Bank Research Institute, in an article published in the 21st Century Business Herald. The currency is supported by the resilience of the Chinese economy with an improved manufacturing supply chain, secure energy and food supply lines, as well as moderate inflation pressure, wrote Ying. China's balance of payments will remain basically balanced, Ying added.
China’s infrastructure investment is expected to reach double digit growth in Q3, after growing by 7.1% in year-on-year terms during H1. A new major project construction boom is set to provide the boost, which will further consolidate the country's economic recovery, the Economic Daily reported, citing analysts. The State Grid said it will complete about CNY300 billion of investment and start a large number of major projects totaling CNY417 billion by the end of 2022, while the Ministry of Transport said it will front-load projects focusing on canals and fixing dead end roads, the Daily said. In H1, a total of 134,000 new projects were started, an increase of 26,000 compared with the same period last year, the newspaper added.
China's Chamber of International Commerce expressed firm opposition to the U.S. chip bill signed by President Joe Biden on Tuesday, noting that it will take the necessary measures to safeguard the legitimate rights and interests of Chinese companies, CCTV News reported, citing a statement on the CCOIC's website. The bill, which will provide subsidies to the U.S. chip industry, does not conform to the non-discrimination principle of the WTO, the statement said. The bill also identifies some countries as key targets, bringing increased uncertainty to the business activities of global enterprises, the statement said.
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